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What changed in MIMEDX GROUP, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MIMEDX GROUP, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+362 added−586 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in MIMEDX GROUP, INC.'s 2023 10-K

362 paragraphs added · 586 removed · 238 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

100 edited+49 added−114 removed73 unchanged
Biggest changeEPIFIX and EPICORD products are marketed for external use, such as in Advanced Wound Care applications, while our AMNIOFIX, AMNIOEFFECT, AXIOFILL, and AMNIOCORD products are positioned for use in Surgical Recovery applications, including lower extremity repair, plastic surgery, vascular surgery and multiple orthopedic repairs and reconstructions.
Biggest changeOur primary platform technologies include tissue allografts derived from human placental membrane (EPIFIX®, AMNIOFIX®, EPIEFFECT® and AMNIOEFFECT®), tissue allografts derived from human umbilical cord (EPICORD® and AMNIOCORD®), and a particulate extracellular matrix derived from human placental disc (AXIOFILL®). 7 GlobalData Tissue Engineered-Skin Sub Data Model Wound Management Year 2020 – retrieved Sept 2021 8 GlobalData Tissue Engineered-Skin Sub Data Model Wound Management Year 2020 – retrieved Sept 2021 9 EPIFIX, EPICORD and EPIEFFECT products are marketed for external use, such as in Advanced Wound Care applications, while our AMNIOFIX, AMNIOCORD and AMNIOEFFECT products are positioned for use in Surgical applications, including lower extremity repair, plastic surgery, vascular surgery and multiple orthopedic repairs and reconstruction, and our AXIOFILL product is positioned for use in the replacement or supplementation of damaged or inadequate integumental tissue.
Under JMHLW guidelines, EPIFIX is classified as a Class IV Medical Device and “Specified Biological Product” and is approved for the treatment of refractory ulcers, such as DFUs and VLUs that do not respond to conventional therapy. As a condition of the final approval, MIMEDX will conduct post-market surveillance, consisting of a limited study over 75 participants.
Under JMHLW guidelines, EPIFIX is classified as a Class IV Medical Device and “Specified Biological Product” and is approved for the treatment of refractory ulcers, such as DFUs and VLUs that do not respond to conventional therapy. As a condition of the final approval, MIMEDX will conduct post-market surveillance, consisting of a limited study of over 75 participants.
If the FDA determines that the Company has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, such as issuing an FDA Form 483 notice of inspectional observations; sending a warning letter or untitled letter; issuing an order of retention, 17 destruction, or cessation of marketing; imposing civil money penalties; suspending or delaying issuance of approvals; requiring product recalls; imposing a total or partial shutdown of production; withdrawing approvals or clearances already granted; pursuing product seizures, consent decrees or other injunctive relief; and criminal prosecution through the Department of Justice (“ DOJ ”).
If the FDA determines that the Company has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, such as issuing an FDA Form 483 notice of inspectional observations; sending a warning letter or untitled letter; issuing an order of retention, destruction, or cessation of marketing; imposing civil money penalties; suspending or delaying issuance of approvals; requiring product recalls; imposing a total or partial shutdown of production; withdrawing approvals or clearances already granted; pursuing product seizures, consent decrees or other injunctive relief; and criminal prosecution through the Department of Justice (“ DOJ ”).
The review looked at several areas including: • Air Pollution Control Management • Battery Handling and Disposal • Community Right-to-Know (Hazardous Material Reporting) • Hazardous Waste Management • SARA Title III (Release Reporting) • Solid Waste Management • Spill, Prevention, Control and Countermeasure • State Pollutant Discharge Elimination System (SPDES) 21 • Storm Water Management • Universal Waste Management • Waste Oil Management We are evaluating the results of this exercise in order to consider implementation of measures in support of our Environmental Management program.
The review looked at several areas including: • Air Pollution Control Management • Battery Handling and Disposal • Community Right-to-Know (Hazardous Material Reporting) • Hazardous Waste Management • SARA Title III (Release Reporting) • Solid Waste Management • Spill, Prevention, Control and Countermeasure • State Pollutant Discharge Elimination System (SPDES) • Storm Water Management • Universal Waste Management • Waste Oil Management We are evaluating the results of this exercise in order to consider implementation of measures in support of our Environmental Management program.
As an important part of the Company’s product safety compliance, MIMEDX products are terminally sterilized to an internationally recognized industry standard in addition to having been processed via the PURION process. Our facilities are subject to periodic unannounced inspections by regulatory authorities and may undergo compliance inspections conducted by the FDA and corresponding state and foreign agencies.
As an important part of the Company’s product safety compliance, MIMEDX products are terminally sterilized to an internationally recognized industry standard in addition to having been processed via the PURION process. Our facilities are subject to periodic announced and unannounced inspections by regulatory authorities and may undergo compliance inspections conducted by the FDA and corresponding state and foreign agencies.
Currently, providers that administer EPIFIX or EPICORD allografts and other skin substitutes in the physician office setting are reimbursed based on the size of the graft, computed on a per square centimeter basis. The payment rate is calculated using the manufacturer’s reported average sales price (“ ASP ”) submitted quarterly to CMS.
Currently, providers that administer EPIFIX, EPICORD or EPIEFFECT allografts and other skin substitutes in the physician office setting are reimbursed based on the size of the graft, computed on a per square centimeter basis. The payment rate is calculated using the manufacturer’s reported average sales price (“ ASP ”) submitted quarterly to CMS.
Combining this data with feedback from exit interviews in any instances of voluntary employee turnover, we are able to use these actionable insights to improve 22 employee engagement, provide opportunities for career development, evolve our total rewards offering and evaluate implementation of additional resources to enhance the employee experience at MIMEDX.
Combining this data with feedback from exit interviews in any instances of voluntary employee turnover, we are able to use these actionable insights to improve employee engagement, provide opportunities for career development, evolve our total rewards offering and evaluate implementation of additional resources to enhance the employee experience at MIMEDX.
This payment methodology applies to physician offices, as well as places of service such as patient home, assisted living and nursing home. The Medicare payment rates are updated quarterly based on this ASP information for many skin substitute products but not all. EPIFIX and EPICORD are included on the Medicare national ASP Drug Pricing File.
This payment methodology applies to physician offices, as well as places of service such as patient home, assisted living and nursing home. The Medicare payment rates are updated quarterly based on this ASP information for many skin substitute products but not all. EPIFIX, EPICORD and EPIEFFECT are included on the Medicare national ASP Drug Pricing File.
Coverage and reimbursement vary according to the patient’s health plan and related benefits. The majority of health plans currently provide coverage for EPIFIX and EPICORD for the treatment of DFUs, and many include treatment of VLUs. MIMEDX has secured payer coverage for over 300 million covered lives, allowing a significant number of patients access to our products.
Coverage and reimbursement 13 vary according to the patient’s health plan and related benefits. The majority of health plans currently provide coverage for EPIFIX and EPICORD for the treatment of DFUs, and many include treatment of VLUs. MIMEDX has secured payer coverage for over 300 million covered lives, allowing a significant number of patients access to our products.
Other Healthcare Laws and Compliance Requirements 19 In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including CMS, other divisions of the HHS (e.g., the Office of Inspector General), the DOJ and individual United States Attorney offices within the DOJ, and state and local governments.
Other Healthcare Laws and Compliance Requirements In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including CMS, other divisions of the HHS (e.g., the Office of Inspector General), the DOJ and individual United States Attorney offices within the DOJ, and state and local governments.
Private Payers 14 We have devoted considerable resources to clinical trials to support coverage and reimbursement of our products. An increasing number of private payers reimburse for EPIFIX and EPICORD in the physician office, the HOPD and the ASC settings, and we have complete national commercial coverage for the use of EPIFIX in the treatment of DFUs.
Private Payers We have devoted considerable resources to clinical trials to support coverage and reimbursement of our products. An increasing number of private payers reimburse for EPIFIX and EPICORD in the physician office, the HOPD and the ASC settings, and we have complete national commercial coverage for the use of EPIFIX in the treatment of DFUs.
The FDA conducts periodic inspections of HCT/P manufacturing facilities, and contract manufacturers’ facilities, to assess compliance with CGTP. Such inspections can occur at any time, with or without written notice, at such frequency as determined by the FDA in its sole discretion.
The FDA conducts periodic inspections of HCT/P manufacturing facilities, and contract manufacturers’ facilities, to assess compliance with CGTP. Such inspections can occur at any time, with or without written notice, at such frequency as determined 15 by the FDA in its sole discretion.
In addition, we market multiple sizes of EPIFIX and EPICORD sheets for use as protective barriers, which enables a healthcare provider to select an appropriate size graft based on the size of the wound to reduce product waste.
In addition, we market multiple sizes of EPIFIX, EPICORD and EPIEFFECT sheets for use as protective barriers, which enables a healthcare provider to select an appropriate size graft based on the size of the wound to reduce product waste.
Our strategy is to continue to deliver advanced products that serve patient needs within the Advanced Wound Care and Surgical Recovery markets and increase access to our products through clinical data generation and physician education.
Our strategy is to continue to deliver advanced products that serve patient needs within the Advanced Wound Care and Surgical markets and increase access to our products through clinical data generation and physician education.
We also make these reports available free of charge on our website, www.mimedx.com, under the heading “ Investors–SEC Filings .” In addition, our Audit Committee, Compensation Committee, Ethics and Compliance Committee, and Nominating and Corporate Governance Committee Charters as well as our Code of Business Conduct and Ethics, are on our website under the heading “ Investors–Corporate Governance .” The reference to our website does not constitute incorporation by reference of any information contained on that site. 23
We also make these reports available free of charge on our website, www.mimedx.com, under the heading “ Investors–SEC Filings .” In addition, our Audit Committee, Compensation Committee, Ethics and Compliance Committee, and Nominating and Corporate Governance Committee Charters as well as our Code of Business Conduct and Ethics, are on our website under the heading “ Investors–Corporate Governance .” The reference to our website does not constitute incorporation by reference of any information contained on that site. 20
In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. International Regulation (Japan) 20 MIMEDX received regulatory approval from the Japanese Ministry of Health, Labour and Welfare (JMHLW) to market EPIFIX in Japan.
In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. International Regulation (Japan) In 2021, MIMEDX received regulatory approval from the Japanese Ministry of Health, Labour and Welfare (JMHLW) to market EPIFIX in Japan.
Environmental Management We recently worked with a third-party to conduct an environmental, health, and safety gap assessment in order to accurately benchmark our environmental impact.
Environmental Management 18 We recently worked with a third-party to conduct an environmental, health, and safety gap assessment in order to accurately benchmark our environmental impact.
MIMEDX also secured reimbursement approval from JMHLW on September 1, 2022 with an awarded rate of 35,100 Yen/cm 2 , and subsequently entered into an exclusive distribution agreement with Gunze Medical for sales of EPIFIX in Japan. Insurance coverage for EPIFIX will provide doctors and patients in Japan with new treatment options and optimal wound care.
MIMEDX also secured reimbursement approval from JMHLW in September 2022 with an awarded rate of 35,100 Yen/cm 2 , and subsequently entered into an exclusive distribution agreement with Gunze Medical for sales of EPIFIX in Japan. Insurance coverage for EPIFIX will provide doctors and patients in Japan with new treatment options and optimal wound care.
EPIFIX EPIFIX is a protective barrier allograft comprised of dehydrated human amnion/chorion membrane that may be used in the treatment of chronic wounds, including diabetic foot ulcers (DFUs), venous leg ulcers (VLUs), and pressure ulcers. EPIFIX is available in an assortment of sheet configurations and sizes to accommodate various wounds.
Wound Portfolio EPIFIX EPIFIX is a protective barrier allograft comprised of dehydrated human amnion/chorion membrane that may be used in the treatment of chronic wounds, including diabetic foot ulcers (DFUs), venous leg ulcers (VLUs), and pressure ulcers. EPIFIX is available in an assortment of sheet configurations and sizes to accommodate various wounds.
AMNIOFIX AMNIOFIX is a semi-permeable, protective barrier allograft comprised of dehydrated human amnion/chorion membrane that may be used in Surgical Recovery applications. AMNIOFIX is available in an assortment of sheet configurations and sizes for internal use, including in the areas of lower extremity repair, spine, orthopedic, sports medicine, gastrointestinal, urologic, and other general surgery applications.
Surgical Portfolio AMNIOFIX AMNIOFIX is a protective barrier allograft comprised of dehydrated human amnion/chorion membrane that may be used in Surgical Recovery applications. AMNIOFIX is available in an assortment of sheet configurations and sizes for internal use, including in the areas of lower extremity repair, spine, orthopedic, sports medicine, gastrointestinal, urologic, and other general surgery applications.
There is a risk that CMS or another government agency may take the position that our products are not human cell and tissue products regulated solely under Section 361, and thereby assert that we are currently subject to the Sunshine Act, which could subject us to civil penalties and the administrative burden of having to comply with the law. • Federal conflicts of interest laws, the Standards of Ethical Conduct for Employees of the Executive Branch, and local site policies for each federal institution we call upon govern our interactions with federal employees at our various government accounts ( e.g. , DoD, VA, etc .) and impose a number of limitations on such interactions. • There are state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.
There is a risk that CMS or another government agency may take the position that our products are not human cell and tissue products regulated solely under Section 361, and thereby assert that we are currently subject to the Sunshine Act, which could subject us to civil penalties and the administrative burden of having to comply with the law. • Federal conflicts of interest laws, the Standards of Ethical Conduct for Employees of the Executive Branch, and local site policies for each federal institution we call upon govern our interactions with federal employees at our various government accounts ( e.g. , DoD, VA, etc .) and impose a number of limitations on such interactions. • There are state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts. 17 In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
Employee Ethnic/Racial Diversity Black or African American: 25% Hispanic or Latino: 8% Other Non-White (including American Indian, Alaskan Native, Asian, Native Hawaiian, or Other Pacific Islander): 6% Recruiting, Retaining, and Engaging Talent Talent is our greatest asset and we are dependent on being able to recruit, develop, and retain talent that share our Core Values.
Employee Ethnic/Racial Diversity Black or African American: 25% Hispanic or Latino: 9% Other Non-White (including American Indian, Alaskan Native, Asian, Native Hawaiian, or Other Pacific Islander): 9% Recruiting, Retaining, and Engaging Talent 19 Talent is our greatest asset and we are dependent on being able to recruit, develop, and retain talent that share our Core Values.
The PURION process produces an allograft that retains the tissue’s inherent biological properties and regulatory proteins (including cytokines, chemokines, and growth factors) found in the placental tissue and produces an allograft that is safe and easy for healthcare providers to use. The allograft can be stored at room temperature and has a five-year shelf life.
The PURION process produces an allograft that retains the tissue’s inherent biological properties and regulatory proteins (including cytokines, chemokines, and growth factors) found in the placental tissue and produces an allograft that is safe and easy for healthcare providers to use. Our allografts can be stored at room temperature and have a five-year shelf life.
The packaging of our product cartons is recyclable and, since 2015, has been reduced in size by 50%. Human Capital As of December 31, 2022, we had 867 full time employees. Generally, we consider our relationships with our employees to be good, and none of our employees are covered by a collective bargaining agreement.
The packaging of our product cartons is recyclable and, since 2015, has been reduced in size by 50%. Human Capital As of December 31, 2023, we had 895 full time employees. Generally, we consider our relationships with our employees to be good, and none of our employees are covered by a collective bargaining agreement.
Both studies reported an increase in wounds healed with adequate debridement. Advanced Wound Care therapies employ technologies to aid in wound healing in cases where the wound is chronic and healing progress has stalled or stopped.
Both studies reported an increase in wounds healed with adequate debridement. AWC therapies employ technologies to aid in wound healing in cases where the wound is chronic and healing progress has stalled or stopped.
As of the date of the filing of this Annual Report, in addition to international patents and patent applications, we own 68 U.S. patents related to our amniotic tissue technology and products, and 30 additional patent applications covering aspects of this technology are pending at the United States Patent and Trademark Office.
As of the date of the filing of this Annual Report, in addition to international patents and patent applications, we own 74 U.S. patents related to our amniotic tissue technology and products, and 25 additional patent applications covering aspects of this technology are pending at the United States Patent and Trademark Office.
Distributors purchase products from us at wholesale prices and resell products to providers and end users. For example, in Japan, our distribution partner, Gunze Medical, purchases products from us and is responsible for sales to the end users for the approved indications of use and at the prevailing reimbursement rate for the product.
We also sell our products through distributors. Distributors purchase products from us at wholesale prices and resell products to providers and end users. For example, in Japan, our distribution partner, Gunze Medical, purchases products from us and is responsible for sales to the end users for the approved indications of use and at the prevailing reimbursement rate for the product.
AXIOFILL is an extracellular matrix derived from human placental disc, and is designed to provide a cost-effective human collagen scaffold that is conducive for use in large, complex wounds and those of irregular geometries. Our AXIOFILL product has seen initial adoption by clinicians primarily focused on Surgical Recovery applications.
AXIOFILL AXIOFILL is an extracellular matrix derived from human placental disc, and is designed to provide a cost-effective human collagen scaffold that is conducive for use in large, complex wounds and those of irregular geometries. Our AXIOFILL product has seen most uptake by clinicians primarily focused on Surgical applications.
Our EPICORD and EPICORD Expandable product lines also offer an alternative treatment option to address larger, deeper wounds in a cost-effective way earlier in the treatment algorithm.
Our EPICORD, EPICORD Expandable and EPIEFFECT product lines also offer an alternative treatment option to address larger, deeper wounds in a cost-effective way at a point earlier in the treatment algorithm.
However, often times advanced therapies are not employed due to current treatment guidelines, product access, or medical education around the clinical and economic benefits of advanced skin substitutes. We believe this represents a large opportunity for us to expand the market and drive initiatives resulting in market growth.
However, oftentimes advanced therapies are not employed due to current treatment guidelines, product access, or medical education around the clinical and economic benefits of AWC products, including skin substitutes. We believe this represents a large opportunity for us to expand the market and drive initiatives resulting in market growth.
According to data provided by BioMedGPS, MIMEDX’s EPIFIX is the current product of choice for physicians choosing to use an amniotic skin substitute product as a barrier or cover.
According to recent data, MIMEDX’s EPIFIX is the current product of choice for physicians choosing to use an amniotic skin substitute product as a barrier or cover.
The table below provides an overview of MIMEDX’s diversity as of December 31, 2022: Board of Directors Women and minorities hold one-third of the seats on our Board, including the Chair of the Board. Employee Gender Diversity Women represented 57% of our workforce as of December 31, 2022. Women represented 61% of our new hires in 2022.
The table below provides an overview of MIMEDX’s diversity as of December 31, 2023: Board of Directors Women and minorities hold one-third of the seats on our Board, including the Chair of the Board. Employee Gender Diversity Women represented 56% of our workforce. Women represented 55% of our new hires in 2023.
MIMEDX also has a micronized version of this product that it no longer markets or sells in the United States, but does sell outside the United States.
MIMEDX also has a micronized version of this product that it no longer markets or sells in the United States.
We estimate that the combined U.S. wound and surgical market for our products is currently $2.0 billion ($1.1 billion in wound; $0.9 billion in surgical) and is largely under-penetrated 4 . We expect the U.S. wound and surgical market will grow at an annual rate of 7-10% over the next 3 to 5 years 5 .
We estimate that the combined U.S. wound and surgical market for our products is currently $2.0 billion ($1.1 billion in wound; $0.9 billion in surgical) and is largely under-penetrated 7 . We expect the U.S. wound and surgical market will grow at an annual rate of 7-10% over the next three to five years beginning in 2023 8 .
AMNIOEFFECT The Company also launched AMNIOEFFECT during the third quarter of 2022. AMNIOEFFECT is a tri-layer placental tissue allograft that contains amnion, intermediate layer, and chorion membranes. This product is designed to meet the needs of surgeons performing procedures where a more robust allograft with expansive size offerings is desired.
AMNIOEFFECT AMNIOEFFECT is a tri-layer placental tissue allograft that contains amnion, intermediate layer, and chorion membranes. This product is designed to meet the needs of surgeons performing procedures where a more robust allograft with expansive size offerings is desired.
As further discussed below under the heading “ Government Regulation - 2017 FDA Guidance and Transition Policy for HCT/Ps ,” the FDA clarified in its 2017 guidance that it regards micronized amniotic membrane products as subject to FDA licensure as biological products under Section 351.
As further discussed below under the heading “ Government Regulation and Compliance - 2017 FDA Guidance and Transition Policy for HCT/Ps ,” the FDA clarified in its 2017 guidance that it regards micronized amniotic membrane products as subject to FDA licensure as biological products under Section 351 of the Public Health Service Act ( “Section 351” ).
Generally, our products are regulated as Human Cells, Tissues and Cellular and Tissue – Based Products (“ HCT/Ps ”), which do not require pre-market clearance or approval by the FDA and are subject solely to Section 361 of the Public Health Service Act (“ Section 361 ”) and related regulations.
Generally, our products currently sold in the United States are regulated as Human Cells, Tissues, and Cellular and Tissue - Based Products ( “HCT/Ps” ), and are subject solely to Section 361 of the Public Health Service Act (“ Section 361 ”) and related regulations, which do not require pre-market clearance or approval by the FDA.
Similarly, private, third-party payers have their own coverage criteria and negotiate reimbursement amounts for medical products, services, and procedures with providers.
Federal healthcare programs have prescribed coverage criteria and reimbursement rates for medical products, services, and procedures. Similarly, private, third-party payers have their own coverage criteria and negotiate reimbursement amounts for medical products, services, and procedures with providers.
Additional regulatory requirements may be imposed in the future.” Our History Our current business began on February 8, 2008 when Alynx, Co., our predecessor company, acquired MiMedx, Inc., a development-stage medical device company, the assets of which included licenses to two development-stage medical device technology platforms which we do not currently market.
Our History Our current business began on February 8, 2008 when Alynx, Co., our predecessor company, acquired MiMedx, Inc., a development-stage medical device company, the assets of which included licenses to two development-stage medical device technology platforms which we do not currently market.
Our wholly-owned subsidiary, MiMedx Tissue Services, LLC, is registered with the FDA as an establishment that manufactures human cells, tissues, and cellular and tissue- based products and is involved with the recovery and storage of donated human placental tissues. We reimburse tissue banks, hospitals, and physicians for their services associated with the recovery and storage of donated human tissue.
Our wholly-owned subsidiary, MiMedx Tissue Services, LLC, is registered with the FDA as an establishment that manufactures human cells, tissues, and cellular and tissue- based products and is involved with the recovery and storage of donated human placental tissues.
As of the date of this report, both EPIFIX and EPICORD allografts are eligible for coverage by all MACs. In January 2019, EPIFIX and EPICORD received separate CMS HCPCS Codes, Q4186 and Q4187, distinguishing each product in coverage and reimbursement policies.
As of the date of this report, both EPIFIX and EPICORD allografts are eligible for coverage by all MACs. In January 2019, EPIFIX and EPICORD received separate CMS HCPCS Codes, Q4186 and Q4187, distinguishing each product in coverage and reimbursement policies. On July 1, 2023, EPIEFFECT received a CMS Code Q4278, also.
We also maintain a network of independent sales agents that focus on Surgical Recovery applications leveraging the complementary products in their portfolios, and provide access to certain customers, as well as sales coverage for areas where we do not have a full-time sales representative. We also sell our products through distributors.
Our direct sales force primarily focuses on the Wound and Surgical categories through multiple sites of service. We also maintain a network of independent sales agents that focus on Surgical applications leveraging the complementary products in their portfolios, and provide access to certain customers, as well as sales coverage for areas where we do not have a full-time sales representative.
Revenue in the ASC setting constitutes less than 1% of the Company’s annual net sales. Medicare payments for most items and services, including EPIFIX and EPICORD sheet products, have been subject to sequestration reductions of approximately 2% periodically from 2013.
CMS assigns lower national rates to the ASC to reflect a less resource-intensive place of service. Revenue in the ASC setting constitutes less than 1% of the Company’s annual net sales. Medicare payments for most items and services, including EPIFIX and EPICORD sheet products, have been subject to sequestration reductions of approximately 2% periodically from 2013.
Placenta Donation Program We partner with physicians and hospitals to recover donated placental tissue. Through our donor program, a mother who delivers a healthy baby via Caesarean section can donate her placenta and umbilical cord tissue in lieu of having it discarded as medical waste.
Through our donor program, a mother who delivers a healthy baby via Caesarean section can donate her placenta and umbilical cord tissue in lieu of having it discarded as medical waste.
We are continuously looking to expand the breadth of our product offering, further leveraging birth tissue that would otherwise become medical waste, and have a product pipeline that includes innovations for wound and surgical end markets as well as a potential treatment option for other conditions such as knee osteoarthritis (KOA).
We are continuously looking to expand the breadth of our product offering, further leveraging birth tissue that would otherwise become medical waste, and have a product pipeline that includes innovations for wound and surgical end markets.
Comprised of employees across the company, our Inclusion and Diversity Council implements programs to create greater visibility to work environment challenges, champion diversity, and provide an intentional link for each employee to the company values and goals.
Comprised of employees across the Company, our Inclusion and Diversity Council reviews programs created to support best practices for our work environment challenges, champion diversity, and provide an intentional link for each employee to the company values and goals.
Our core business delivers innovative products that help clinicians treat patients suffering from acute and chronic non-healing wounds. These wounds can be slow to respond or unresponsive to conventional treatments and may benefit from advanced treatments, such as our products, in order to support the healing process.
Our products help clinicians treat patients suffering from chronic and other hard-to-heal wounds. These wounds can be slow to respond or unresponsive to conventional treatments and may benefit from advanced treatments, such as through the use of our products, in order to support the healing process.
Customer Concentration For the years ended December 31, 2022, 2021, and 2020, our net sales to all U.S. government accounts comprised approximately 2%, 3% and 5% of our net sales, respectively.
Customer Concentration For the years ended December 31, 2023, 2022, and 2021, our top ten customers accounted for 20%, 19% and 19%, r espectively, of our net sales, and net sales to all U.S. government accounts comprised approximately 2%, 2% and 3%, respectively, of our net sales.
Together, these rules form a comprehensive system intended to encourage significant innovation. The FDA requires each HCT/P establishment to register and establish that its product meets the requirements to qualify for regulation solely under Section 361.
The FDA requires each HCT/P establishment to register and establish that its product meets the requirements to qualify for regulation solely under Section 361.
In order for us to be eligible to have 10 GlobalData: 2022 Orthopedic Devices — Knee Reconstruction – US – 2015-2030 11 GlobalData: 2020 Orthopedic Devices – Knee Reconstruction – US – 2015-2030 12 GlobalData: 2020 Orthopedic Devices – Viscosupplementation – US – 2015-2030 13 our products purchased by such federal agencies and paid for by the Medicaid program, federal law requires us to participate in the VA Federal Supply Schedule (“ FSS ”) pricing program.
In order for us to be eligible to have our products purchased by such federal agencies and paid for by the Medicaid program, federal law requires us to participate in the VA Federal Supply Schedule (“ FSS ”) pricing program.
As a registered tissue establishment, we are required to comply with regulations regarding labeling, record keeping, donor eligibility, screening, and testing. We are also required to process the tissue in accordance with established CGTP, as well as report any deviations from core CGTP requirements or adverse reactions caused by a possible transmission of an infectious disease attributed to our tissue.
We are also required to process the tissue in accordance with established CGTP, as well as report any deviations from core CGTP requirements or adverse reactions caused by a possible transmission of an infectious disease attributed to our tissue. Our facilities are also subject to periodic inspections to assess our compliance with the regulations.
Each MAC also has its own standards and process for determining coverage and reimbursement for a procedure or product. Private payers often follow the lead of governmental payers in making coverage and reimbursement determinations. Therefore, achieving favorable Medicare coverage and reimbursement is usually a significant gating factor for successful adoption of a new product or clinical application by private payers.
Each MAC also has its own standards and process for determining coverage and reimbursement for a procedure or product. Private payers often follow the lead of governmental payers in making coverage and reimbursement determinations.
In addition, challenges with xenografts include limited clinical published data, and some products may require suturing or stapling to the wound bed, making handling more difficult.
In addition, challenges with xenografts include limited clinical published data, and some products may require suturing or stapling to the wound bed, making handling 14 more difficult. Furthermore, other skin substitutes currently on the market require cryogenic freezer storage and have limited shelf life.
To determine compliance with the applicable provisions, the inspection may include, but is not limited to, an assessment of the establishment’s facilities, equipment, finished and unfinished materials, containers, processes, HCT/Ps, procedures, labeling, records, files, papers and controls required to be maintained under 21 CFR Part 1271. 16 If the FDA were to find serious non-compliant manufacturing or processing practices during such an inspection, it could take regulatory actions that could adversely affect our business, results of operations, financial condition, and cash flows. 2017 FDA Guidance and Transition Policy for HCT/Ps In November 2017, the FDA released four guidance documents that, collectively, the agency described as a “comprehensive policy framework” for applying existing laws and regulations governing regenerative medicine products, including HCT/Ps.
If the FDA were to find serious non-compliant manufacturing or processing practices during such an inspection, it could take regulatory actions that could adversely affect our business, results of operations, financial condition, and cash flows. 2017 FDA Guidance and Transition Policy for HCT/Ps In November 2017, the FDA released four guidance documents that, collectively, the agency described as a “comprehensive policy framework” for applying existing laws and regulations governing regenerative medicine products, including HCT/Ps.
We believe that our patents, proprietary manufacturing processes, trade secrets, trademarks, and technology licensing rights provide us with important competitive advantages. 10 Patents and Patent Applications Due to the substantial expertise and investment of time, effort and financial resources required to bring new regenerative biomaterial products and implants to the market, the importance of obtaining and maintaining patent protection for significant new technologies, products and processes cannot be underestimated.
Patents and Patent Applications Due to the substantial expertise and investment of time, effort and financial resources required to bring new regenerative biomaterial products and implants to the market, the importance of obtaining and maintaining patent protection for significant new technologies, products and processes cannot be underestimated.
The national HOPD average packaged (“bundled”) rate for our EPIFIX and EPICORD allograft products was $1,549 in 2019, $1,623 in 2020, $1,715 in 2021, $1,749.26 in 2022, and is $1,725 in 2023. CMS assigns lower national rates to the ASC to reflect a less resource-intensive place of service.
The national HOPD average packaged (“bundled”) rate for our EPIFIX and EPICORD allograft products was $1,549 in 2019, $1,623 in 2020, $1,715 in 2021, $1,749.26 in 2022, and $1,725 in 2023. The national HOPD average packaged (“bundled”) rate for our EPIFIX, EPICORD and EPIEFFECT products in 2024 is $1,738.
We are registered with the FDA as a tissue establishment and are subject to the FDA’s CGTP quality program regulations, state regulations, and regulations promulgated by various regulatory authorities outside the United States.
We are registered with the FDA as a tissue establishment and are subject to the FDA’s CGTP quality program regulations, state regulations, and regulations promulgated by various regulatory authorities outside the United States. The FDA initiated inspections covering our Marietta, Georgia, and Kennesaw, Georgia, processing facilities from February 22, 2023, through March 2, 2023.
Compensation and Benefits We offer all full-time employees a comprehensive benefits package, including: • Health coverage, including Medical, Dental, Vision insurance, a wellness incentive program and virtual and text-based healthcare • Paid Parental and Caregiver leave • Employee Assistance Program • Paid company holidays, recently adding Juneteenth • Tuition Reimbursement Program • 401(k) plan, including Employer match • Employee Stock Purchase Plan Available Information We are required to file proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K with the SEC.
Compensation and Benefits We offer all full-time employees a comprehensive benefits package, including: • Health coverage, including Medical, Dental, Vision insurance, a wellness incentive program and virtual and text-based healthcare • Paid Parental and Caregiver leave • Employee Assistance Program • Paid company holidays • 401(k) plan, including Employer match • Employee Stock Purchase Plan opportunity.
Market Overview Domestic sales currently account for substantially all of our revenue, and we are actively pursuing international expansion, primarily targeting Japan and select countries in Europe, Asia Pacific, and the Middle East. In the United States, our primary areas of clinical use include Advanced Wound Care and Surgical Recovery applications.
Market Overview Domestic sales currently account for substantially all of our revenue today. In the United States, our primary areas of clinical use include applications in surgical settings as well as for the treatment of wounds and burns. Additionally we are actively pursuing international expansion, primarily targeting Japan, as discussed below.
Our EPIFIX and EPICORD products can be stored at room temperature for up to five years compared to certain other skin substitutes currently on the market that require cryogenic freezer storage, have limited shelf life, and may not be human-derived.
Our EPIFIX, EPICORD® and EPIEFFECT® products can be stored at room temperature for up to five years, in contrast to certain other skin substitutes currently on the market that have performance, storage or handling limitations.
Our Quality Management System is focused on compliance with the American Association of Tissue Banks’ (“ AATB ”) standards and the FDA’s CGTP and CGMP regulations.
We maintain strict controls on quality at each step of the manufacturing process beginning at the time of procurement. Our Quality Management System is focused on compliance with the American Association of Tissue Banks’ (“ AATB ”) standards, the FDA’s CGTP regulations, and applicable foreign regulations.
The FDA issued a Form FDA 483 (“ 483 ”), which is a list of inspectional observations, at the conclusion of each inspection. Specifically, the FDA issued a 483 consisting of nine observations at our Marietta, Georgia processing facility, and a 483 consisting of 14 observations at our Kennesaw, Georgia processing facility.
In December 2019, the FDA also conducted inspections at each of our Marietta, Georgia and Kennesaw, Georgia processing facilities. The FDA also issued a Form 483 for each facility at the conclusion of the inspection, which consisted of nine observations at our Marietta, Georgia processing facility and 14 observations at our Kennesaw, Georgia processing facility.
The FCA also allows a private individual or entity as a whistleblower to sue on behalf of the government to recover civil penalties and treble damages.
The FCA also allows a private individual or entity as a whistleblower to sue on behalf of the government to recover civil penalties and treble damages. FCA liability is potentially significant in the healthcare industry because the statute provides for significant damages (treble) and mandatory penalties per false claim or statement.
The coverage and reimbursement framework for products under Medicare is determined in accordance with the Social Security Act and pursuant to regulations promulgated by CMS, as well as the agency’s coverage and reimbursement guidance.
Therefore, achieving favorable Medicare coverage and reimbursement is usually a significant gating factor for successful adoption of a new product or clinical application by private payers. 12 The coverage and reimbursement framework for products under Medicare is determined in accordance with the Social Security Act and pursuant to regulations promulgated by CMS, as well as the agency’s coverage and reimbursement guidance.
If the FDA makes a final determination that our umbilical cord-derived products do not meet the requirements for regulation solely under Section 361, then, in order to continue to market the products, we would be required to obtain the appropriate FDA clearance or approval. In 2022, revenues from US sales of our umbilical cord-derived products were $23.2 million.
If the FDA makes a final determination that these products do not meet the requirements for regulation solely under Section 361 then, in order to continue to market the products, the Company would be required to obtain the appropriate FDA clearance or approval. The FDA has broad regulatory compliance and enforcement powers.
The proposed LCDs also include language that could lower the number of allowed applications of a product below what is commonly used in standard practice by physicians today (supported by clinical evidence) and reflected by LCDs currently in force with the MACs. The Company as well as stakeholders across the wound care industry do not support lowering the applications.
These LCDs included language that would have lowered the number of allowed applications of a product below what is commonly used in standard practice by physicians today (supported by clinical evidence) and reflected by LCDs currently in force with the MACs.
We have focused our priorities on initiatives across our organization that position us to realize our commercial ambitions over the long-term while also generating a profitable, cash flow positive business capable of self-funding our future growth objectives. Business Segments Beginning in the third quarter of 2022, the Company manages itself as two reportable segments: Wound & Surgical and Regenerative Medicine.
We have focused our priorities on initiatives across our organization that position us to realize our commercial ambitions over the long-term while also generating a profitable, cash flow positive business capable of self-funding our future growth objectives. Our Product Portfolio & Pipeline We sell our placenta-based allograft products under our own brands.
MIMEDX provides products primarily for use in the wound care, burn, and Surgical Recovery sectors of healthcare. All of our products sold in the United States are regulated by the U.S. Food & Drug Administration (“ FDA ”), and to the extent we sell our products outside the United States, by other regulatory agencies in such international markets.
Food & Drug Administration (“ FDA ”), and to the extent we sell our products outside the United States, by other regulatory agencies in such international markets.
The costs associated with treatment and management of patients with acute and chronic wounds is also high, with some estimates of the Medicare spend associated with such wounds approaching $100 billion annually. The treatment of chronic wounds is often referred to as wound care.
The costs associated with treatment and management of patients with acute and chronic wounds is also high, with some estimates of the Medicare spend associated with such wounds approaching $100 billion annually. The large and increasing number of patients requiring advanced treatment represents a significant cost burden on the healthcare system.
This enforcement discretion applied across our industry, and during the period, the Company continued to market its products under this policy of enforcement discretion. After May 31, 2021, the Company no longer markets or sells its products that were impacted by enforcement discretion in the United States. We are pursuing the BLA pre-market approval process for certain uses of mDHACM.
This enforcement discretion applied across our industry, and during the period, the Company continued to market its products under this policy of enforcement discretion. After May 31, 2021, the Company ceased marketing or selling in the United States its products that were impacted by enforcement discretion, including its micronized dehydrated human amnion chorion membrane ( “mDHACM” ) products.
Chronic wounds are defined and characterized as those that do not progress through the normal process of healing and remain open for over a month.
Chronic wounds are defined and characterized as those that do not progress through the normal process of healing and remain open for an extended period of time, which, depending on the wound, can be from several weeks to a few months.
Among other things, the Guidance clarified the FDA’s views about the criteria that differentiate those products subject to regulation solely under Section 361 (“ Section 361 HCT/Ps ”) from those cellular and tissue-based products considered to be drugs, devices, and/or biological products (“ Section 351 HCT/Ps ”) subject to licensure under Section 351 of the Public Health Service Act (“ Section 351 ”) and related regulations.
We do not currently sell in the United States those cellular and tissue-based products considered to be drugs, devices, and/or biological products (“ Section 351 HCT/Ps ”) subject to licensure under Section 351 of the Public Health Service Act ( “Section 351” ) and related regulations.
See Note 12, Revenue to our consolidated audited financial statements included in Item 8 of this Annual Report. Coverage and Reimbursement With the exception of government accounts, most purchasers of our products include physicians, hospitals, or ambulatory surgery centers (“ ASCs ”) that rely on reimbursement by third-party payers.
Coverage and Reimbursement With the exception of government accounts, most purchasers of our products include physicians, hospitals, or ambulatory surgery centers (“ ASCs ”) that rely on reimbursement by third-party payers. Accordingly, our growth substantially depends on adequate levels of third-party reimbursement for our products from these payers.
Tissue Bank Laws, Regulations, and Related Accreditation As discussed above, we are required to register with the FDA as an establishment that manufactures human cells, tissues, and cellular and tissue-based products. We are licensed, registered, or permitted as a tissue bank in California, New York, Delaware, Illinois, Oregon, and Maryland. Additionally, we received and actively maintain AATB accreditation.
We are licensed, registered, or permitted as a tissue bank in California, New York, Delaware, Illinois, Oregon, and Maryland. Additionally, we received and actively maintain AATB accreditation. The AATB has issued operating standards for tissue banking. Compliance with these standards is required in order to become an AATB-accredited tissue establishment.
AHRQ conducted a literature search yielding 164 studies and 81 Supplemental Evidence and Data for Systematic Reviews (“ SEADs ”) submissions. Only 22 randomized, controlled trials (“ RCTs ”) met the inclusion criteria to be reviewed in the AHRQ analysis, and out of the 22 RCTs MIMEDX had six RCTs included in the final brief.
Only 22 randomized, controlled trials (“ RCTs ”) met the inclusion criteria to be reviewed in the AHRQ analysis, and out of the 22 RCTs MIMEDX had six RCTs included in the final brief. Of the 22 studies reviewed, only 12 were assessed as low risk of bias, of which five were MIMEDX RCTs.
The prevalence of both acute and chronic wounds has grown not only in the U.S. but also globally. While historically we have focused primarily on the U.S. market, we are now in the process of expanding our footprint internationally, most notably with the recent launch of our EPIFIX product in Japan.
While historically we have focused primarily on the U.S. market, we are in the process of expanding our footprint internationally, most notably with the recent launch of our EPIFIX product in Japan. EPIFIX is the first and currently the only amniotic tissue product approved in Japan for wound treatment across a broad range of conditions.
As discussed below, our Section 361 HCT/Ps are tissue-based products that are regulated solely under Section 361 and do not require pre-market clearance or approval by the FDA. Our Section 351 HCT/Ps are also tissue products, but are regulated as biological products, and, in order to be lawfully marketed in the United States, require FDA pre-market approval.
Section 351 HCT/Ps are regulated as biological products, and, in order to be lawfully marketed in the United States, require FDA pre-market approval. Tissue Products In 1997, the FDA proposed a regulatory framework for cells and tissues.
A key innovation in the system was that covered HCT/Ps would be regulated solely under Section 361 and would not be subject to pre-market clearance. The registration and listing rules were finalized in January 2001 in 21 CFR Part 1271. Additional rules regarding donor eligibility and good tissue practices were soon adopted.
The registration and listing rules were finalized in January 2001 in 21 CFR Part 1271. Additional rules regarding donor eligibility and good tissue practices were soon adopted. Together, these rules form a comprehensive system intended to encourage significant innovation.
MIMEDX is a leading supplier of human placental allografts, which are human tissues that are derived from one person (the donor) and used to produce products that treat another person (the recipient). MIMEDX has supplied over two million allografts, through direct shipments.
Today, our product portfolio is made up entirely of human placental allografts, which are human tissues that are derived from one person (the donor) and used to produce products that treat multiple people (the recipients). MIMEDX has supplied roughly three million allografts, through all shipments, filling direct orders and consignment orders, through December 31, 2023.
Of the 22 studies reviewed, only 12 were assessed as low risk of bias, of which five were MIMEDX RCTs. This important government assessment highlights our commitment to providing unbiased level 1 clinical evidence in advanced wound treatment.
This important government assessment highlights our commitment to providing unbiased level 1 clinical evidence in advanced wound treatment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Regulatory Approval of Our Products and Other Government Regulations Certain of our products no longer qualify for regulation as human cells, tissues and cellular and tissue-based products solely under Section 361 of the Public Health Service Act (“Section 361”), which has resulted in removal of the applicable products from the market, made the introduction of some new tissue products more expensive, significantly delayed the expansion of our tissue product offerings and subjected us to additional post-market regulatory requirements.
Biggest changeRisks Related to Regulatory Approval of Our Products and Other Government Regulations The FDA has in the past determined, and may in the future determine, that certain of our products that are, or are derived from, human cells or tissues, do not qualify for regulation solely under Section 361 of the Public Health Service Act (“Section 361”), and may require that we revise our labeling and marketing claims for these products or that we suspend sales of such products until FDA pre-market clearance or approval is obtained, which could adversely affect our business, results of operations, and financial condition.
If we fail to attract the coverage or securities analysts, or if securities analysts discontinue covering our common stock, the lack of research coverage may adversely affect the actual and potential market price of our common stock.
If we fail to attract the coverage of securities analysts, or if securities analysts discontinue covering our common stock, the lack of research coverage may adversely affect the actual and potential market price of our common stock.
See “ We and our sales representatives, whether employees or independent contractors, must comply with various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause an adverse effect on our business, results of operations and financial condition.” We may be subject to fines, penalties, injunctions and other sanctions if we are deemed to be promoting the use of our products for unapproved, or off-label, uses.
See “ We and our sales representatives, whether employees or independent contractors, must comply with various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause an adverse effect on our business, results of operations and financial condition.” 28 We may be subject to fines, penalties, injunctions and other sanctions if we are deemed to be promoting the use of our products for unapproved, or off-label, uses.
The federal Anti-Kickback Statute (AKS) is a criminal law that prohibits, among other things, any person from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward referrals, purchases or orders or arranging for or recommending the purchase, order or referral of any item or service for which payment may be made in whole or in part by a federal healthcare program, such as the Medicare and Medicaid programs.
The federal Anti-Kickback Statute (“ AKS ”) is a criminal law that prohibits, among other things, any person from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward referrals, purchases or orders or arranging for or recommending the purchase, order or referral of any item or service for which payment may be made in whole or in part by a federal healthcare program, such as the Medicare and Medicaid programs.
While we believe these transactions generally meet the requirements of applicable laws, including the federal AKS and analogous state laws, it is possible that our arrangements with physicians and other providers may be questioned by regulatory or enforcement authorities under such laws, which could lead us to redesign 37 the arrangements and subject us to significant civil or criminal penalties.
While we believe these transactions generally meet the requirements of applicable laws, including the federal AKS and analogous state laws, it is possible that our arrangements with physicians and other providers may be questioned by regulatory or enforcement authorities under such laws, which could lead us to redesign the arrangements and subject us to significant civil or criminal penalties.
In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not produce sales in excess of the costs 26 of development, or they may never receive required regulatory approval and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.
In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not produce sales in excess of the costs of development, or they may never receive required regulatory approval and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.
We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed alleged trade secrets, proprietary or confidential information of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors. 41 Some of our employees were previously employed at other medical device, pharmaceutical or tissue companies.
We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed alleged trade secrets, proprietary or confidential information of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors. Some of our employees were previously employed at other medical device, pharmaceutical or tissue companies.
The continually changing threat landscape of cybersecurity today makes our systems potentially vulnerable to service interruptions 31 or to security breaches from inadvertent or intentional actions by our employees, partners, and vendors, and from attacks by malicious third parties, including supply chain attacks originating at our third-party partners. Such attacks are of ever-increasing levels of sophistication.
The continually changing threat landscape of cybersecurity today makes our systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, partners, and vendors, and from attacks by malicious third parties, including supply chain attacks originating at our third-party partners. Such attacks are of ever-increasing levels of sophistication.
Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our distribution and sales activities. These risks may limit or disrupt our expansion, restrict the movement of funds or result in the deprivation of contractual rights or the taking of property by nationalization or expropriation without fair compensation.
Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our distribution and sales activities. 26 These risks may limit or disrupt our expansion, restrict the movement of funds or result in the deprivation of contractual rights or the taking of property by nationalization or expropriation without fair compensation.
We may also hire additional employees who are currently employed at other medical device, pharmaceutical or tissue companies, including our competitors. Additionally, consultants or other independent agents with which we may contract may be or have been in a contractual arrangement with one or more of our competitors.
We may also hire additional employees who are currently employed at other medical device, pharmaceutical or tissue companies, including our competitors. Additionally, consultants or other independent agents with which we may contract may be or have been in a 33 contractual arrangement with one or more of our competitors.
In addition, some of these physicians own our stock, which they purchased in arm’s-length transactions on terms identical to those offered to non-physicians, or received stock awards from us in the past as consideration for services performed by them.
In addition, some of these physicians own our stock, which 29 they purchased in arm’s-length transactions on terms identical to those offered to non-physicians, or received stock awards from us in the past as consideration for services performed by them.
Our ability to conduct international operations is affected by many of the same risks we face in our U.S. operations, as well as unique costs and difficulties of managing international operations, including the relationships and 32 operations of distributors we elect to work with in these markets.
Our ability to conduct international operations is affected by many of the same risks we face in our U.S. operations, as well as unique costs and difficulties of managing international operations, including the relationships and operations of distributors we elect to work with in these markets.
Generally, unless the products are approved by the FDA for alternative uses, the FDA contends that we may not make claims about the safety or 36 effectiveness of our products, or promote them as safe or effective for uses other than those specifically approved by the FDA.
Generally, unless the products are approved by the FDA for alternative uses, the FDA contends that we may not make claims about the safety or effectiveness of our products, or promote them as safe or effective for uses other than those specifically approved by the FDA.
The results of early clinical trials are not necessarily predictive of future results, and any product we advance into clinical trials may not have favorable results in later clinical trials. Our interpretation of data and results from our clinical trials does not ensure that we will achieve similar results in future clinical trials.
Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product we advance into clinical trials may not have favorable results in later clinical trials. Our interpretation of data and results from our clinical trials does not ensure that we will achieve similar results in future clinical trials.
In addition, clinical data are often susceptible to various 34 interpretations and analyses, and many companies that have believed their products performed satisfactorily in earlier clinical trials or retrospective studies have nonetheless failed to replicate results in later clinical trials.
In addition, clinical data are often susceptible to various interpretations and analyses, and many companies that have believed their products performed satisfactorily in earlier clinical trials or retrospective studies have nonetheless failed to replicate results in later clinical trials.
Our products depend on the availability of tissue from human donors, and any disruption in supply could adversely affect our business. The success of our human tissue products depends upon, among other factors, the availability of tissue from human donors.
Many of our products depend on the availability of tissue from human donors, and any disruption in supply could adversely affect our business. The success of our human tissue products depends upon, among other factors, the availability of tissue from human donors.
U.S. or non-U.S. government regulations may be imposed in the future that may have a material adverse effect on our business and operations. 39 Federal and state laws that protect the privacy and security of personal information may increase our costs and limit our ability to collect and use that information and subject us to liability if we are unable to fully comply with such laws.
U.S. or non-U.S. government regulations may be imposed in the future that may have a material adverse effect on our business and operations. 31 Federal and state laws that protect the privacy and security of personal information may increase our costs and limit our ability to collect and use that information and subject us to liability if we are unable to fully comply with such laws.
Moreover, the existing coverage of our insurance or any rights of indemnification and contribution that we may have may not be sufficient to offset existing or future claims.
Moreover, the existing coverage of our insurance or any rights of indemnification and contribution that we 24 may have may not be sufficient to offset existing or future claims.
These legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. In addition, our pending patent applications include claims to material aspects of our products and procedures that are not currently protected by issued patents. The patent application process can be time consuming and expensive.
These legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. In addition, our pending patent applications include claims to material aspects of our products and procedures that may not be protected by issued patents. The patent application process can be time consuming and expensive.
These provisions of Florida law and our articles of incorporation and bylaws could negatively affect our share price, prevent attempts by shareholders to remove current management, prohibit or delay mergers or other takeovers or changes of control of the Company and discourage attempts by other companies to acquire us, even if such a transaction would be beneficial to our shareholders. 46 Item 1B.
These provisions of Florida law and our articles of incorporation and bylaws could negatively affect our share price, prevent attempts by shareholders to remove current management, prohibit or delay mergers or other takeovers or changes of control of the Company and discourage attempts by other companies to acquire us, even if such a transaction would be beneficial to our shareholders. 36 Item 1B.
There are federal and state laws requiring detailed reporting of manufacturer interactions with and payments to healthcare providers, such as the federal Physician Payments Sunshine Act (Sunshine Act).
There are federal and state laws requiring detailed reporting of manufacturer interactions with and payments to healthcare providers, such as the federal Physician Payments Sunshine Act (“ Sunshine Act ”).
We intend to implement and maintain rigorous CGMP standards throughout our entire supply chain and continue to advance the scientific body of evidence substantiating clinical efficacy, economic viability and the underlying mechanism of action for our PURION processed placental tissue platform through additional peer-reviewed publications, rigorous scientific research and clinical studies.
We intend to implement and maintain rigorous quality standards throughout our entire supply chain and continue to advance the scientific body of evidence substantiating clinical efficacy, economic viability and the underlying mechanism of action for our PURION processed placental tissue platform through additional peer-reviewed publications, rigorous scientific research and clinical studies.
Additionally, we cannot predict the impact of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis only. 38 Our results of operations may be adversely affected by current and potential future healthcare reforms.
Additionally, we cannot predict the impact of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis only. 30 Our results of operations may be adversely affected by current and potential future healthcare reforms.
If the relevant patent claims at issue in such a dispute were upheld as valid and enforceable and we were found to infringe, we could be prohibited from selling any product that is found to infringe those claims unless we could obtain licenses to use the technology covered by the asserted patent claims or other intellectual property, or are able to design around the patent claim or claims at issue or other intellectual property.
If the relevant patent claims at issue in such a dispute were upheld as valid and enforceable and we were found to infringe, we could be prohibited from selling any product that is found to infringe those claims through an injunction unless we could obtain licenses to use the technology covered by the asserted patent claims or other intellectual property, or are able to design around the patent claim or claims at issue or other intellectual property.
We currently expect to use available funds and any future earnings to pay dividends on the Series B Preferred Stock; in the development, operation and expansion of our business; to repay debt; and, to the extent authorized by our Board, repurchasing our Common Stock. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
We currently expect to use available funds and any future earnings; in the development, operation and expansion of our business; to repay debt; and, to the extent authorized by our Board, repurchasing our Common Stock. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
If we are unable to establish new independent sales representative and distribution relationships or renew current sales agency and distribution agreements on commercially acceptable terms, our business, financial condition, and results of operations could be materially and adversely affected.
If we are unable to establish new independent sales representative and distribution relationships or renew current sales agency and distribution agreements on commercially acceptable terms, our business, financial condition, and results of operations could be materially and adversely affected. Disruption of our processing facilities could adversely affect our business, financial condition and results of operations.
Consequently, the effects of a default under other debt may be amplified by the lender exercising the remedies available to it in the Hayfin Loan Agreement for events of default, including foreclosure on the collateral securing our obligations and the declaration that all amounts outstanding under the Hayfin Loan Agreement are immediately due and payable.
Consequently, the effects of a default under other debt may be amplified by the lenders exercising the remedies available to it in the Citizens Credit Agreement for events of default, including foreclosure on the collateral securing our obligations and the declaration that all amounts outstanding under the Citizens Credit Agreement are immediately due and payable.
Our substantial outstanding debt may limit our ability to borrow additional funds or may adversely affect the terms on which such additional funds may be available. Additionally, a default under certain other indebtedness constitutes an event of default under the Hayfin Loan Agreement.
Our outstanding debt may limit our ability to borrow additional funds or may adversely affect the terms on which such additional funds may be available. Additionally, a default under certain other indebtedness constitutes an event of default under the Citizens Credit Agreement.
Approximately three-quarters of our sales in the year ended December 31, 2022 came from customers that are members of our primary GPOs or IDNs. Our agreements with GPOs and IDNs allow us to sell our products efficiently to large groups of customers.
Approximately 79% of our sales in the year ended December 31, 2023 came from customers that are members of our primary GPOs or IDNs. Our agreements with GPOs and IDNs allow us to sell our products efficiently to large groups of customers.
Our sales of such products for all uses was $2.4 million, $17.6 million, and $31.8 million, respectively, in 2022, 2021, and 2020. Prior to May 31, 2021 these sales were primarily in the United States.
Our sales of such products for all uses was $0.5 million, $2.4 million, and $17.6 million, respectively, in 2023, 2022, and 2021. Prior to May 31, 2021, these sales were primarily in the United States.
In developing our priorities, we evaluated many factors including, without limitation, those related to developments in our industry, customer demand, competition, regulatory developments, and general economic conditions. Actual conditions may be different from our assumptions, and we may not be able to successfully execute our priorities.
We have sought and may continue to seek capital to implement our priorities. In developing our priorities, we evaluated many factors including, without limitation, those related to developments in our industry, customer demand, competition, regulatory developments, and general economic conditions. Actual conditions may be different from our assumptions, and we may not be able to successfully execute our priorities.
If the FDA makes a final determination that our umbilical cord products do not meet the requirements for regulation solely under Section 361, in order to continue to market the products, we would be required to obtain the appropriate FDA approval or clearance.
If the FDA makes a final determination that any of these products do not meet the requirements for regulation solely under Section 361, in order to continue to market the products, we would be required to obtain the appropriate FDA approval or clearance.
Some of the future products and enhancements to our current products that we expect to develop or may acquire and market may require marketing clearance or approval from the FDA.
The FDA may take the position that some of the products that we currently market require a BLA. Some of the future products and enhancements to our current products that we expect to develop or may acquire and market may require marketing clearance or approval from the FDA.
However, negative publicity concerning disease transmission from other companies’ improperly processed donated tissue could have a negative impact on the demand for our products and adversely affect our business, financial condition and results of operations.
However, risks exist with any human tissue implantation. Also, negative publicity concerning disease transmission from other companies’ improperly processed donated tissue could have a negative impact on the demand for our products and adversely affect our business, financial condition and results of operations.
However, such clearance or approval does not ensure approval or certification by regulatory authorities in other countries or jurisdictions, and approval or certification by one foreign regulatory authority does not ensure approval or certification by regulatory authorities in other foreign countries or by the FDA.
Certain of our products require clearance or approval by the FDA. However, such clearance or approval does not ensure approval or certification by regulatory authorities in other countries or jurisdictions, and approval or certification by one foreign regulatory authority does not ensure approval or certification by regulatory authorities in other foreign countries or by the FDA.
We have in the past reported material weaknesses in our internal control over financial reporting which we have now remediated. If additional material weaknesses or deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements might contain material misstatements and we could be required to restate our financial results.
If material weaknesses or deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements might contain material misstatements and we could be required to restate our financial results.
If one or more of these analysts cease coverage of us, we could lose visibility in the market, which in turn could cause our stock price to decline. Fluctuations in revenue or results of operations could cause additional volatility in our stock price.
If one or more of these analysts cease coverage of us, we could lose visibility in the market, which in turn could cause our stock price to decline.
Any disruption of our products on the FSS or any change in the way the government purchases products like ours or the price it is willing to pay for our products could adversely affect our business, results of operations and financial condition.
Any disruption of our products on the FSS or any change in the way the government purchases products like ours or the price it is willing to pay for our products could adversely affect our business, results of operations and financial condition. New lines of business or new products and services may subject us to additional risks.
The restrictive covenants in the Hayfin Loan Agreement, and the Company’s obligation to make debt payments under the Hayfin Loan Agreement, limit our operating and financial flexibility and may adversely affect our business, results of operations and financial condition. The Hayfin Loan Agreement, as amended, imposes operating and financial restrictions and covenants.
The restrictive covenants in the Citizens Credit Agreement, and the Company’s obligation to make payments under the Citizens Credit Agreement, limit our operating and financial flexibility and may adversely affect our business, results of operations and financial condition. The Citizens Credit Agreement imposes operating and financial restrictions and covenants.
Risks Related to Our Past Audit Committee Investigation, Consolidated Financial Statements, Internal Controls and Related Matters If we fail to maintain adequate internal control over financial reporting in the future, this could adversely affect our business, financial condition and operating results.
Risks Related to Our Consolidated Financial Statements, Internal Controls and Related Matters If we fail to maintain adequate internal control over financial reporting in the future, this could adversely affect our business, financial condition and operating results. We have in the past reported material weaknesses in our internal control over financial reporting which we have since remediated.
The success of any new product offering or enhancement to an existing product will depend on numerous factors, including our ability to: • properly identify and anticipate physician and patient needs; • acquire, through licensing, co-development or outright purchase, new technology developed outside of MIMEDX; • develop and introduce new products or product enhancements in a timely manner; • adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties; • demonstrate the safety and efficacy of new products; and • obtain the necessary regulatory clearances or approvals for new products or product enhancements.
The success of any new product offering or enhancement to an existing product will depend on numerous factors, including our ability to: • properly identify and anticipate physician and patient needs; • acquire, through licensing, co-development or outright purchase, new technology developed outside of MIMEDX; • develop and introduce new products or product enhancements in a timely manner; • adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties; • demonstrate the safety and efficacy of new products; and • obtain the necessary regulatory clearances or approvals for new products or product enhancements. 21 If we do not develop and, when necessary, obtain regulatory clearance or approval for new products or product enhancements in time to meet market demand, or if there is insufficient demand for these products or enhancements, our results of operations and financial condition will suffer.
These companies and the physicians who own, or partially own, PODs may have significant market knowledge, access to and influence on the physicians who use our products and the hospitals that purchase our products, and we may not be able to compete effectively for business from physicians who own PODs. 30 We face the risk of product liability claims and may not be able to obtain or maintain adequate product liability insurance.
These companies and the physicians who own, or partially own, PODs may have significant market knowledge, access to and influence on the physicians who use our products and the hospitals that purchase our products, and we may not be able to compete effectively for business from physicians who own PODs.
Risks that could impact our ability to use these facilities include the occurrence of natural and other disasters, the outbreak of pandemics, and the need to comply with the requirements of directives from government agencies, including the FDA.
Our business depends upon the continued operation of our processing facilities in Marietta, Georgia and Kennesaw, Georgia. Risks that could impact our ability to use these facilities include the occurrence of natural and other disasters, the outbreak of pandemics, and the need to comply with the requirements of directives from government agencies, including the FDA.
Although we have taken steps to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with some of our officers, employees, consultants and advisors, such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. 40 The failure to obtain and maintain patents or protect our intellectual property rights could have an adverse effect on our business, results of operations, and financial condition.
Although we have taken steps to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with some of our officers, employees, consultants and advisors, such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements.
In connection with one or more of those transactions, we may, subject to the requirements and limitations set forth in our secured credit agreement (the “ Hayfin Loan Agreement ”) with Hayfin Services, LLP (“ Hayfin ”) an affiliate of Hayfin Capital Management LLP: • issue additional equity securities that would dilute the value of equity currently held by our shareholders; • divest or license existing products or technology; • use cash that we may need in the future to operate our business; • incur debt that could have terms unfavorable to us or that we might be unable to repay; • structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit a step-up in the tax basis for the assets acquired; • be unable to realize the anticipated benefits, such as increased revenues, cost savings, or synergies from additional sales; and • be unable to secure the services of key employees related to the transaction(s).
In connection with one or more of those transactions, we may, subject to the requirements and limitations set forth in our Citizens Credit Agreement (as defined below in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“ MD&A ”), Liquidity and Capital Resources): • divest or license existing products or technology; • use cash that we may need in the future to operate our business; • incur debt that could have terms unfavorable to us or that we might be unable to repay; • structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit a step-up in the tax basis for the assets acquired; • be unable to realize the anticipated benefits, such as increased revenues, cost savings, or synergies from additional sales; and • be unable to secure the services of key employees related to the transaction(s).
Third parties could assert that our products infringe their patents or other intellectual property rights. Whether a product infringes a patent claim or other intellectual property right involves a complex combination of legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property rights of others.
Third parties could assert that our products infringe one or more claims of their issued patents or other intellectual property rights. Whether a product infringes a patent claim or other intellectual property right involves a complex combination of legal and factual issues, the determination of which is often uncertain.
Moreover, increased regulatory scrutiny within the industry in which we operate could lead to increased regulation of HCT/Ps, including Section 361 HCT/Ps, which could ultimately increase our costs and adversely impact our business, results of operations and financial condition. If the FDA approves the BLAs we seek, we will incur increased compliance costs on an ongoing basis.
Moreover, increased regulatory scrutiny within the industry in which we operate could lead to increased regulation of HCT/Ps, including Section 361 HCT/Ps, which could ultimately increase our costs and adversely impact our business, results of operations and financial condition.
Others may develop services, products or processes with significant advantages over the products, services and processes that we offer or are seeking to develop. Any such occurrence could have an adverse effect on our business, results of operations and financial condition.
Competition intensifies as technical advances in each field are made and become more widely known. Others may develop services, products or processes with significant advantages over the products, services and processes that we offer or are seeking to develop. Any such occurrence could have an adverse effect on our business, results of operations and financial condition.
Also, for as long as EW Healthcare Partners and its affiliates collectively hold at least (i) 10% of the outstanding shares of our Common Stock (calculated on an as converted basis), EW Healthcare Partners has the right to designate two directors to our Board and (ii) 5% (but less than 10%) of the outstanding shares of our outstanding Common Stock (calculated on an as converted basis), EW Healthcare Partners has the right to designate one individual to serve on our Board.
Also, for as long as EW Healthcare Partners and its affiliates collectively hold at least (i) 10% of the outstanding shares of our Common Stock, EW Healthcare Partners has the right to select two individuals that the Company must include among its nominees to serve on our Board and (ii) 5% (but less than 10%) of the outstanding shares of our outstanding Common Stock, EW Healthcare Partners has the right to select one individual that the Company must include among its nominees to serve on our Board.
Further, bringing litigation to enforce our patents subjects us to the potential for counterclaims. Other companies or entities also have commenced, and may again commence, actions seeking to establish the invalidity of our patents and certain related claims.
Other companies or entities also have commenced, and may again commence, actions seeking to establish the invalidity of our patents and certain related claims.
External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
In developing and marketing new lines of business and new products and services, we may invest significant time and resources. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
There are risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or are evolving. In developing and marketing new lines of business and new products and services, we may invest significant time and resources.
From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. There are risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or are evolving.
Price volatility or a decrease in the market price of our Common Stock could have an adverse effect on our ability to raise capital, liquidity, business, financial condition and results of operations.
Price volatility or a decrease in the market price of our Common Stock could have an adverse effect on our ability to raise capital, liquidity, business, financial condition and results of operations. Securities analysts may elect not to report on our common stock or may issue negative reports that adversely affect the stock price.
For example, the FDA may in the future impose conditions, such as labeling restrictions, and the requirement that a product be manufactured in compliance with CGMP.
For example, the FDA may in the future impose conditions, such as labeling restrictions, and the requirement that a product be manufactured in compliance with CGMP, which would require significant additional time and cost investments by the Company.
We may fail to obtain or maintain foreign regulatory approvals to market our products in other countries. We currently market our products in a small number of foreign countries, and are actively pursuing international expansion, including in Japan. Foreign jurisdictions require separate regulatory approvals and compliance with numerous and varying regulatory requirements.
We may fail to obtain or maintain foreign regulatory approvals to market our products in other countries. We currently market our products in a small number of foreign countries, including in Japan. Foreign jurisdictions require separate regulatory approvals and compliance with numerous and varying regulatory requirements. The approval procedures vary among countries and may involve requirements for additional testing.
The fee for filing a BLA and program fees payable with respect to any establishment that manufactures biologics are substantial. Additionally, there are significant costs associated with clinical trials that can be difficult to accurately estimate until a BLA is approved. Clinical trials may not be successful or may return results that do not support approval.
Additionally, there are significant costs associated with clinical trials that can be difficult to accurately estimate until a BLA is approved. Clinical trials may not be successful or may return results that do not support approval.
Rapid technological change could cause our products to become obsolete and, if we do not enhance our product offerings through our research and development efforts, we may be unable to compete effectively. The technologies underlying our products are subject to rapid technological change. Competition intensifies as technical advances in each field are made and become more widely known.
Rapid technological change could cause our products to become obsolete and, if we do not enhance our product offerings through our research and development efforts or business development and inorganic activities, we may be unable to compete effectively. The technologies underlying our products are subject to rapid technological change.
Our pending patent applications might not result in issued patents. Competitors may be able to design around our patents or develop products that provide outcomes that are comparable or even superior to ours.
Our pending patent applications might not result in issued patents, and issued patents may later be determined to be invalid or unenforceable as a result of district court litigation or related administrative proceedings. Competitors may be able to design around our patents or develop products that provide outcomes that are comparable or even superior to ours.
Our revenues will be adversely affected if we fail to obtain BLA approvals on a timely basis or at all, or if the FDA limits the indications for use or requires other conditions that restrict the commercial application of our products. Clinical trials will be necessary to support future BLA submissions and potential product approvals by the FDA.
Our revenues could be adversely 27 affected if we fail to obtain BLA approvals on a timely basis or at all, or if the FDA limited the indications for use or required other conditions that restrict the commercial application of our products.
The FDA may not grant approval on a timely basis, or at all, or we may decide not to pursue a BLA for certain products or indications, or need to conduct additional trials for a given indication.
The fee for filing a BLA and program fees payable with respect to any establishment that manufactures biologics are substantial. The FDA may not grant approval on a timely basis, or at all, or we may decide not to pursue a BLA for certain products or indications, or need to conduct additional trials for a given indication.
These fluctuations could cause the trading price of our stock to be negatively affected. Our quarterly operating results have varied substantially in the past and may vary substantially in the future. We do not intend to pay cash dividends on our Common Stock.
Our quarterly operating results have varied substantially in the past and may vary substantially in the future. We do not intend to pay cash dividends on our Common Stock. We have never declared or paid cash dividends on our Common Stock.
If we fail to receive necessary approvals, certifications, or reimbursements necessary to commercialize our products in foreign jurisdictions such as Japan on a timely basis, or at all, our business, results of operations and financial condition could be adversely affected.
Furthermore, many foreign jurisdictions operate under socialized medical care, and obtaining reimbursement for our products under that construct may also prove difficult. If we fail to receive necessary approvals, certifications, or reimbursements necessary to commercialize our products in foreign jurisdictions on a timely basis, or at all, our business, results of operations and financial condition could be adversely affected.
Because patent applications may take years to issue, there also may be applications now pending of which we are unaware that may later result in issued patent claims that our products or processes infringe. There also may be existing patents or pending patent applications of which we are unaware that our products or processes may inadvertently infringe.
Therefore, we cannot be certain that we have not infringed the intellectual property rights of others. Because patent applications are not immediately published, and may take years to issue, there also may be applications now pending of which we are unaware that may later result in issued patent claims that our products or processes may infringe.
Whether a patent claim is valid is a complex matter of science, facts and law, and therefore we cannot be certain that, if challenged, our patent claims would be upheld. If any of those patent claims are invalidated, our competitive advantage may be reduced or eliminated.
Whether a patent claim is valid is a complex matter of science, facts and law, and therefore we cannot be certain that, if challenged in a court of law, or through an administrative proceeding, our 32 patent claims would be upheld.
The interests of EW Healthcare Partners may conflict with those of our other shareholders, and EW Healthcare Partners may seek to influence, and may be able to influence, us through its director designation rights and its share ownership.
EW Healthcare Partners designated Martin P. Sutter and William A. Hawkins, III, who continue to serve on our board as directors. The interests of EW Healthcare Partners may conflict with those of our other shareholders, and EW Healthcare Partners may seek to influence, and may be able to influence, us through its director nomination rights and its share ownership.
We may expand or contract our business through acquisitions, divestitures, licenses, investments, and other commercial arrangements with other companies or technologies, which may adversely affect our business, results of operations and financial condition. We periodically evaluate opportunities to acquire companies or divest divisions, technologies, products, and rights through licenses, distribution agreements, investments, and outright acquisitions to grow our business.
We periodically evaluate opportunities to acquire companies or divest divisions, technologies, products, and rights through licenses, distribution agreements, investments, and outright acquisitions to grow our business.
In the event a competitor infringes upon our licensed patents, issued patents, pending patent applications or other intellectual property rights, enforcing those rights may be costly, uncertain, difficult and time consuming. Even if successful, litigation to enforce or defend our intellectual property rights could be expensive and time consuming and could divert our management’s attention.
If any of those patent claims are invalidated or determined to be unenforceable, our competitive advantage may be reduced or eliminated. In the event a competitor infringes upon our licensed patents, issued patents, pending patent applications or other intellectual property rights, enforcing those rights may be costly, uncertain, difficult and time consuming.
There can be no assurance that we will be able to continue to find and attract additional qualified employees to support our expected growth or retain any such personnel. A portion of our revenues and accounts receivable come from government accounts. Some of our revenues are derived from sales, both direct and through a distributor, to the government.
There can be no assurance that we will be able to continue to find and attract additional qualified employees to support our expected growth or retain any such personnel.
In 2022, approximately 22% of our sales were through our relationships with independent agents, and we also use a small number of distributors, primarily outside the United States, and may use more in the future.
In 2023, approximately 24% of our sales were through our relationships with independent agents, and we also use a small number of distributors, primarily outside the United States, and may use more in the future. Sales agents act directly on behalf of MIMEDX to arrange sales, while distributors take title to product and may set their own prices.
Additional regulatory requirements may be imposed in the future. The products we manufacture and process are derived from human tissue.
The products we manufacture and process are derived from human tissue.
The effects of the COVID-19 pandemic or other public health emergencies could have an adverse impact on our business, results of operations and financial condition. We depend on our senior leadership team and may not be able to retain or replace these employees or recruit additional qualified personnel, which would harm our business, results of operations and financial condition.
We depend on our senior leadership team and may not be able to retain or replace these employees or recruit additional qualified personnel, which would harm our business, results of operations and financial condition. Our business and success are materially dependent on attracting and retaining members of our senior leadership team to formulate and execute the Company’s business plans.
Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing and marketing of human tissue products. We may be subject to such claims if our products cause, or appear to have caused, an injury. Claims may be made by patients, healthcare providers or others selling our products.
We may be subject to such claims if our products cause, or appear to have caused, an injury. Claims may be made by patients, healthcare providers or others selling our products.
Further, we have experienced some reluctance by payers to cover our products under certain circumstances, including for applications other than those for which we have published clinical efficacy data. Recently, several wide-ranging proposals have been published for public comment, including relating to payment methodology within the physician office, and are under consideration by the U.S.
Further, we have experienced some reluctance by payers to cover our products under certain circumstances, including for applications other than those for which we have published clinical efficacy data.
Any unanticipated shortfall in our revenue in any fiscal quarter could have an adverse effect on our results of operations in that quarter. The effect on our net income of such a shortfall could be exacerbated by the relatively fixed nature of most of our costs, which primarily include personnel costs as well as facilities costs.
The effect on our net income of such a shortfall could be exacerbated by the relatively fixed nature of most of our costs, which primarily include personnel costs as well as facilities costs. These fluctuations could cause the trading price of our stock to be negatively affected.
However, if our processing facilities were to become unavailable, this could have a material adverse effect on our business, financial condition and results of operations during the period of such unavailability.
However, if our processing facilities were to become unavailable, this could have a material adverse effect on our business, financial condition and results of operations during the period of such unavailability. 23 To be commercially successful, we must educate physicians, where appropriate, how and when our products are proper alternatives to existing treatments and that our products should be used in their procedures.
Our priorities in our Advanced Wound Care and Surgical Recovery Wound & Surgical business are to address large, underpenetrated market opportunities, domestically and internationally, including by launching new organic or inorganic products.
Risks Related to Our Business and Industry If we do not successfully execute our priorities, our business, operating results and financial condition could be adversely affected. Our priorities in our Wound & Surgical business are to address large, underpenetrated market opportunities, domestically and internationally, including by launching new organic or inorganic products.
Any infringement claim could cause us to incur significant costs, place significant strain on our financial resources, divert management’s attention from our business and harm our reputation.
There also may be existing patents or pending patent applications of which we are unaware that our products or processes may inadvertently infringe. Any infringement claim could cause us to incur significant costs, place significant strain on our financial resources, divert management’s attention from our business and harm our reputation.
Leadership changes can be inherently difficult to manage and may cause material disruption to our business or management team. Changes in senior management could also lead to an environment that presents additional challenges in recruiting and retaining employees, which could have an adverse effect on our business, results of operations and financial condition.
Changes in senior management could also lead to an environment that presents additional challenges in recruiting and retaining employees, which could have an adverse effect on our business, results of operations and financial condition. Our future success will also depend, in part, upon our ability to attract and retain skilled personnel, including sales, managerial and technical personnel.
EW Healthcare Partners and its interests may conflict with those of our other shareholders. 43 As of December 31, 2022, EW Healthcare Partners and their affiliates own 90% of the outstanding shares of our Series B Preferred Stock which, upon conversion into shares of Common Stock, would result in an ownership interest of approximately 18.3% of our Common Stock (calculated on the basis described in Item 12, “ Security Ownership Of Certain Beneficial Owners And Management” below).
As of December 31, 2023, EW Healthcare Partners and their affiliates owned approximately 19.3% of our Common Stock (calculated on the basis described in Item 12, “ Security Ownership Of Certain Beneficial Owners And Management” below).
Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and time consuming and may impede our ability to fully exploit our technologies .
Obtaining and maintaining the necessary regulatory approvals, including conducting clinical trials, for certain of our products or potential products could be expensive and time consuming .

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters are located in Marietta, Georgia, where we lease office, laboratory, tissue processing and warehouse space. We lease a facility in Kennesaw, Georgia, which primarily consists of laboratory, tissue processing and warehouse space, and are currently subletting additional warehouse space in Marietta, Georgia through May 31, 2023.
Biggest changeItem 2. Properties Our corporate headquarters are located in Marietta, Georgia, where we lease office, laboratory, tissue processing and warehouse space. We also lease a facility in Kennesaw, Georgia, which primarily consists of laboratory, tissue processing and warehouse space. Our properties are used for the design, manufacture and marketing of Wound & Surgical product portfolio.
Removed
Our properties, excluding the sublet space, are used by our Wound & Surgical segment, which includes the design, manufacture and marketing of products and tissue processing services primarily for the wound care, burn, Surgical Recovery, and non-operative sports medicine sectors of healthcare, additionally, our Kennesaw facility is used for the Regenerative Medicine segment.
Added
We believe that such properties are suitable and adequate to meet the needs of our business.
Removed
The Company’s properties are suitable and adequate for current business operations. We are making investments to increase our manufacturing capacity, as well as enhancements to facilitate the processing of products required to be manufactured under CGMP.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graph The following graph compares the cumulative total stockholder return on our Common Stock with the cumulative total stockholder return of the Nasdaq Composite Index, the Nasdaq Biotechnology Index and the Russell 2000 Index, assuming an investment of $100.00 on December 31, 2017. 47 ASSUMES $100 INVESTED ON DEC. 31, 2017 ASSUMES DIVIDEND REINVESTMENT; NO DIVIDENDS ISSUED BY MIMEDX FISCAL YEAR ENDED DEC. 31, 2022 Change in Comparison Index During 2022, we changed our Cumulative Total Return comparison from the Nasdaq Biotechnology Index to the Russell 2000 Index.
Biggest changeStock Performance Graph The following graph compares the cumulative total stockholder return on our Common Stock with the cumulative total s tockholder return of the Nasdaq Composite Index and the Russell 2000 Index, for the five year period that commenced on December 31, 2018 and ended December 31, 2023, assuming an investment of $100.00 on December 31, 2018.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Common Stock Our Common Stock trades on The Nasdaq Stock Market under the trading symbol “MDXG”. Holders Based upon information supplied from our transfer agent, there were approximately 857 shareholders of record of our Common Stock as of February 21, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Common Stock Our Common Stock trades on The Nasdaq Stock Market under the trading symbol “MDXG”. Holders Based upon information supplied from our transfer agent, there were approximately 810 shareholders of record of our Common Stock as of February 23, 2024.
The Company’s common stock is not included on the Nasdaq Biotechnology Index. 48 Securities Authorized for Issuance Under Equity Compensation Plans Information about securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Recent Sales of Unregistered Securities None.
ASSUMES $100 INVESTED ON DEC. 31, 2018 ASSUMES DIVIDEND REINVESTMENT; NO DIVIDENDS ISSUED BY MIMEDX FISCAL YEAR ENDED DEC. 31, 2023 38 Securities Authorized for Issuance Under Equity Compensation Plans Information about securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table sets forth information regarding the purchases of the Company’s equity securities made by or on behalf of the Company or any affiliated purchaser (as defined in Rule 10b-18 under the Exchange Act) during the three-month period ended December 31, 2022.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no purchases of our Common Stock made by or on behalf of the Company during the year ended December 31, 2023. 39 Item 6. [Reserved]
Removed
The Russell 2000 Index, which includes the Company’s common stock, is a stock index consisting of 2000 publicly-traded small-cap companies. We use the Russell 2000 for peer benchmarking in certain compensation arrangements with certain of our employees.
Added
Dividends We have not paid any dividends since our inception and do not anticipate declaring or paying any cash dividends on our Common Stock in the foreseeable future.
Removed
We believe the Russell 2000 provides more meaningful information than the Nasdaq Biotechnology Index because the breadth of the latter index contains significant diversity in market capitalization, stage of clinical development, total addressable markets, and other factors.
Added
Payment of future dividends, if any, will be at the discretion of our Board of Directors and will depend on many factors, including general economic and business conditions, our strategic plans, our financial results and condition, legal requirements and other factors as our Board deems relevant.
Removed
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs October 1, 2022 - October 31, 2022 — $ — — $ — November 1, 2022 - November 30, 2022 — $ — — $ — December 1, 2022 - December 31, 2022 — $ — — $ — Total for the quarter — $ — — $ — 49 Item 6. [Reserved]
Added
Recent Sales of Unregistered Securities On December 22, 2023, all 95,000 outstanding shares of the Company’s Series B Convertible Preferred Stock (the “ Preferred Stock ”), together with accrued dividends, were mandatorily converted into shares of the Company’s Common Stock in accordance with the Preferred Stock terms set forth in the Company’s Articles of Incorporation, as amended.
Added
T he Preferred Stock conversion, triggered by the Company’s increased Common Stock share price and following the third anniversary of the Preferred Stock financing transaction in July of 2020.
Added
As a result of this conversion, 29,761,650 new shares of Common Stock were issued by the Company to an affiliate of EW Healthcare Partners and to certain funds managed by Hayfin Capital Management LLP. The Company received no consideration upon the conversion.
Added
The shares of Common Stock issued pursuant to the conversion of the Preferred Stock were issued in reliance upon exemptions pursuant to Section 3(a)(9) under the Securities Act of 1933, as amended, and pursuant to applicable state securities laws and regulations, in that the shares of Common Stock were issued by the Company to its existing security holders and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations for 2022 Compared to 2021 Total Company Year Ended December 31, (in thousands) 2022 2021 $ Change % Change Net sales $ 267,841 $ 258,615 $ 9,226 3.6 % Cost of sales 48,316 43,283 5,033 11.6 % Gross profit 219,525 215,332 4,193 1.9 % Selling, general and administrative 208,789 198,359 10,430 5.3 % Research and development 22,829 17,344 5,485 31.6 % Investigation, restatement and related 12,177 3,791 8,386 nm Amortization of intangible assets 701 820 (119) (14.5) % Impairment of intangible assets — 53 (53) (100.0) % Interest expense, net (5,016) (4,980) (36) 0.7 % Other expense, net (4) (23) 19 (82.6) % Income tax provision expense (206) (247) 41 (16.6) % Net loss $ (30,197) $ (10,285) $ (19,912) nm Net Sales We recorded net sales for the year ended December 31, 2022 of $267.8 million, an increase of $9.2 million or 3.6% over 2021 net sales of $258.6 million.
Biggest changeResults of Continuing Operations for 2023 Compared to 2022 Year Ended December 31, (in thousands) 2023 2022 $ Change % Change Net sales $ 321,477 $ 267,841 $ 53,636 20.0 % Cost of sales 54,634 48,316 6,318 13.1 % Gross profit 266,843 219,525 47,318 21.6 % Selling, general and administrative 211,124 208,673 2,451 1.2 % Research and development 12,665 12,701 (36) (0.3) % Investigation, restatement and related 5,176 12,177 (7,001) (57.5) % Amortization of intangible assets 762 701 61 8.7 % Interest expense, net (6,457) (5,016) (1,441) 28.7 % Other expense, net (26) (4) (22) nm Income tax provision benefit (expense) 36,806 (206) 37,012 nm Net income (loss) from continuing operations $ 67,439 $ (19,953) $ 87,392 nm Net Sales We recorded net sales for the year ended December 31, 2023 of $321.5 million, an increase of $53.6 million, or 20.0%, over the year ended December 31, 2022 net sales of $267.8 million.
Liquidity and Capital Resources We require capital for our operating activities, including costs associated with the sale of product through direct and indirect sales channels, the conduct of clinical trials and other research and development activities, compliance costs, costs to sell and market our products, regulatory fees, and legal and consulting fees in connection with ongoing litigation and other matters.
Liquidity and Capital Resources We require capital for our operating activities, including costs associated with the sale of product through direct and indirect sales channels, research and development activities, compliance costs, costs to sell and market our products, regulatory fees, and legal and consulting fees in connection with ongoing litigation and other matters.
This discussion, which presents our results for the fiscal years ended December 31, 2022 and 2021, should be read in conjunction with our Consolidated Financial Statements and the accompanying notes.
This discussion, which presents our results for the fiscal years ended December 31, 2023 and 2022, should be read in conjunction with our Consolidated Financial Statements and the accompanying notes.
Our Annual Report for the year ended December 31, 2021 includes a discussion and analysis of our total company financial condition and results of operations for 2021 compared to 2020 in Part II, Item 7, Management’s Discussion and Analysis of 50 Financial Condition and Results of Operations .
Our Annual Report for the year ended December 31, 2022 (the “ 2022 Annual Report ”) includes a discussion and analysis of our total company financial condition and results of operations for 2022 compared to 2021 in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations .
Additions or reversals to our return allowance, as determined necessary, are accounted for prospectively and recorded as a decrease or increase to net sales, respectively. Actual returns are recorded against the recorded accrual. Sensitivity of Estimate to Change We have accrued $0.7 million for sales returns as of December 31, 2022.
Additions or reversals to our return allowance, as determined necessary, are accounted for prospectively and recorded as a decrease or increase to net sales, respectively. Actual returns are recorded against the recorded accrual. Sensitivity of Estimate to Change We have accrued $1.1 million for sales returns as of December 31, 2023.
Net sales Net sales is recognized based on the consideration we expect to receive from the sale at the point in time when control of the goods is transferred to the customer, which generally occurs upon our delivery to a third-party carrier.
Net sales is recognized based on the consideration we expect to receive from the sale at the point in time when control of the goods is transferred to the customer, which generally occurs upon our delivery to a third-party carrier or implantation for consignment arrangements.
The Company is currently paying its obligations in the ordinary course of business. We believe that our anticipated cash from operating activities and existing cash and cash equivalents will enable us to meet our operational liquidity needs for the twelve months following the filing date of this Annual Report.
The Company is currently paying its obligations in the ordinary course of business. We believe that our anticipated cash from operating activities, existing cash and cash equivalents, and available credit under the Citizens Credit Agreement, as defined below, will enable us to meet our operational liquidity needs for the twelve months following the filing date of this Annual Report.
Investing Activities During the year ended December 31, 2022, net cash used in investing activities was $2.7 million, a decrease of $0.7 million, compared to $3.4 million for the year ended December 31, 2021.
Investing Activities During the year ended December 31, 2023, net cash used in investing activities was $2.2 million, a decrease of $0.5 million, compared to $2.7 million for the year ended December 31, 2022.
The primary reason for the decrease was a $1.7 million decrease in capital expenditures, year-over-year, offset by $1.0 million of payments made pursuant to the Turn Agreement.
The primary reason for the decrease was a $0.5 million increase in capital expenditures, year-over-year, offset by $1.0 million of payments made pursuant to a licensing agreement in 2022.
We maintain a return policy that allows our customers to return product for any reason within 30 days of sale, and to return product that is damaged or non-conforming, ordered in error, or due to recall at any time.
We maintain a return policy that allows our customers to return product for any reason within 30 days of sale, and to return product that is damaged or non-conforming, ordered in error, or due to recall at any time. We anticipate increases in sales returns in light of potential or actual regulatory actions.
These include personnel costs pertaining to our sales force and sales support functions, including salaries, commissions and other incentive compensation, commissions to sales agents, customer support, travel expenses, and bad debt expense.
Selling, general and administrative expense Selling, general and administrative (“ SG&A ”) expense includes costs to execute our sales strategy. These include personnel costs pertaining to our sales force and sales support functions, including salaries, commissions and other incentive compensation, commissions to sales agents, customer support, travel expenses, and bad debt expense.
Investigation, restatement and related expense Investigation, restatement and related expense primarily relates to legal fees advanced to certain former officers and directors of the Company under certain indemnification agreements and our liability from legal proceedings taken against us which arose from the findings of the Audit Committee Investigation.
Investigation, restatement and related expense Investigation, restatement and related expense primarily relates to legal fees advanced to certain former officers and directors of the Company under certain indemnification agreements and our liability from legal proceedings taken against us. The timing and extent of these expenses depend on the stage and status of legal proceedings.
This determination may change due to changes in tax law, a revision to our expectation regarding taxable income in the future, taxable income generated in a period in which we had not previously anticipated taxable income, a change in scheduled reversals of deferred tax liabilities, and other changes.
The amount and extent of the valuation allowance necessary to reflect the extent of realization of these deferred tax assets being more likely than not may change due to changes in tax law, a revision to our expectation regarding taxable income in the future, taxable income generated in a period in which we had not previously anticipated taxable income, a change in scheduled reversals of deferred tax liabilities, and other changes.
Judgments and Uncertainties We sell our products to individual customer and independent distributors (collectively referred to as “ customers ”). Customers obtain and use products either through ship and bill sales or consignment arrangements.
Net Sales Description We record estimates for returns and allowances as a reduction to net sales based on our expectation for such returns. Judgments and Uncertainties We sell our products to individual customer and independent distributors (collectively referred to as “ customers ”). Customers obtain and use products either through ship and bill sales or consignment arrangements.
Regenerative Medicine does not currently generate revenue. Our Products Our primary platform technologies include tissue allografts derived from human placental membrane (EPIFIX, AMNIOFIX, and AMNIOEFFECT), tissue allografts derived from human umbilical cord (EPICORD and AMNIOCORD), and a particulate extracellular matrix derived from human placental disc (AXIOFILL).
By specific source material, our primary platform technologies include tissue allografts derived from human placental membrane (EPIFIX, AMNIOFIX, EPIEFFECT, and AMNIOEFFECT), tissue allografts derived from human umbilical cord (EPICORD and AMNIOCORD), and a particulate extracellular matrix derived from human placental disc (AXIOFILL).
As of December 31, 2022, we had $66.0 million of cash and cash equivalents. Our net working capital at December 31, 2022 was $90.6 million, a decrease of $15.5 million from $106.2 million at December 31, 2021. Our current ratio was 3.1 to 1 as of December 31, 2022 and 3.5 to 1 as of December 31, 2021.
As of December 31, 2023, we had $82.0 million of cash and cash equivalents. Our net working capital at December 31, 2023 was $118.3 million, an increase of $27.6 million from $90.6 million at December 31, 2022. Our current ratio was 3.6 to 1 as of December 31, 2023 and 3.1 to 1 as of December 31, 2022.
We derive these judgments and estimates on historical experience and other relevant factors which we believe to be reasonable. Actual results may differ from these estimates. Net Sales Description We record estimates for returns and allowances as a reduction to net sales based on our expectation for such returns.
We derive these judgments and estimates on historical experience and other relevant factors which we believe to be reasonable. Actual results may differ from these estimates.
These costs tend to fluctuate based on headcount, which will vary depending on our projected business needs. 51 Research and development expense Research and development expense relates to our investments in clinical trials to expand our product pipeline and platforms, as well as expenditures in improvements to our manufacturing process and the enhancement of existing products.
Research and development expense Research and development expense relates to our investments to expand our product pipeline and platforms, including historically through clinical trials, as well as expenditures in improvements to our manufacturing process and the enhancement of existing products.
We generally fund our operating capital requirements through our operating activities and cash reserves. We expect to use capital in the near and medium term to commence late-stage clinical trials for certain of our products, invest in the international expansion of our business and the broadening of our product portfolio, and invest in certain capital projects.
We generally fund our operating capital requirements through our operating activities and cash reserves. We expect to use capital to invest in the broadening of our 43 product portfolio, including through potential acquisitions, licensing agreements or other arrangements, the international expansion of our business and certain capital projects.
Our Advanced Wound Care products include two product categories: Tissue/Other and Cord products. We apply Current Good Tissue Practices (“ CGTP ”) and Current Good Manufacturing Practices (“ CGMP ”) standards in addition to terminal sterilization to produce our allografts.
We apply Current Good Tissue Practices ( “CGTP” ) and other applicable quality standards in addition to terminal sterilization to produce our allografts. Our Products Our product portfolio is divided into two categories (1) Wound Care Products and (2) Surgical and Other Products.
Cost of goods sold and gross profit Cost of goods sold includes product testing costs, quality assurance costs, personnel costs, manufacturing costs, raw materials and product costs, depreciation and facility costs associated with our manufacturing and warehouse facilities. Fluctuations in our cost of goods sold correspond with the fluctuations in these costs as well as sales volume.
Net sales consists of the gross selling price of the product, less any discounts, rebates, fees paid to GPOs, and returns. Cost of goods sold and gross profit Cost of goods sold includes product testing costs, quality assurance costs, personnel costs, manufacturing costs, raw materials and product costs, depreciation and facility costs associated with our manufacturing and warehouse facilities.
Term Loan On June 30, 2020, we entered into a Loan Agreement with, among others, Hayfin Services, LLP, (“ Hayfin ”) an affiliate of Hayfin Capital Management, LLP (the “ Hayfin Loan Agreement ”), under which Hayfin provided us with a senior secured term loan of $50 million (the “ Term Loan ”).
On February 27, 2024, we repaid the initial $30.0 million drawing under the Revolving Credit Facility. Hayfin Term Loan In June 2020, we entered into the Hayfin Loan Agreement, under which Hayfin provided us with a senior secured term loan of $50 million (the “ Hayfin Term Loan ”).
If the weight of available evidence suggests that some or all of this amount is more likely than not to be realized, we will derecognize the valuation allowance as an income tax benefit to the extent that the underlying deferred tax asset is more likely than not to be realized.
If the weight of available evidence suggests that some or all of this amount is more likely than not to be realized, we will change the valuation allowance with a corresponding adjustment to income tax provision (benefit) expense to the extent that the underlying deferred tax asset is more likely than not to be realized. 47 Recently Adopted Accounting Pronouncements See Item 8, Note 2, Significant Accounting Policies , in the Consolidated Financial Statements for recently adopted accounting pronouncements.
Financing Activities During the year ended December 31, 2022, net cash used in financing activities was $0.6 million, a decrease of $2.8 million compared to cash used in financing activities of $3.4 million for the year ended December 31, 2021.
Financing Activities During the year ended December 31, 2023, net cash used in financing activities was $8.6 million, an increase of $8.0 million compared to cash used in financing activities of $0.6 million for the year ended December 31, 2022. During 2023, we repurchased 5,000 shares of our Series B Preferred Stock for $9.5 million.
For example, we pay sales agents a greater commission than our internal sales force, meaning that we could incur greater commission expenses if a greater proportion of our sales are through sales agents. SG&A expense also includes costs related to functions which support both of our business units, such as legal, finance, human resources, and other such functions.
For example, we pay sales agents a greater commission than our internal sales force, meaning that we could incur greater commission expenses if a greater proportion of our sales are through sales agents.
Sensitivity of Estimate to Change As of December 31, 2022, we had $47.6 million of valuation allowances recorded, fully offsetting our net deferred tax asset.
Sensitivity of Estimate to Change As of December 31, 2023, we had $0.9 million in valuation allowances recorded against our deferred tax assets balance of $41.7 million.
Gross profit is calculated as net sales less cost of goods sold. Gross margin is calculated as gross profit divided by net sales. Our gross margin is affected by product and geographic sales mix, realized pricing of our products, the efficiency of our manufacturing operations and the costs of materials used to make our products.
Our gross margin is affected by product and geographic sales mix, realized pricing of our products, the efficiency of our manufacturing operations and the costs of materials used to make our products. Regulatory actions, including with respect to reimbursement for our products, may require costly expenditures or result in pricing pressure, and may decrease our gross profit and gross margin.
Additional regulatory requirements may be imposed in the future.” Discussion of Cash Flows Operating Activities During the year ended December 31, 2022, net cash used in operating activities increased $15.9 million to $17.9 million compared to $2.0 million for the year ended December 31, 2021.
Discussion of Cash Flows for 2023 Compared to 2022 Operating Activities from Continuing Operations During the year ended December 31, 2023, net cash provided by operating activities of continuing operations increased $42.9 million to $34.9 million compared to cash used of $8.0 million for the year ended December 31, 2022.
Corporate Our Corporate function represents activities which support both of our business units, such as legal, finance, human resources, and other supporting functions. Corporate expenses include personnel costs associated with these units, as well as insurance, and certain professional fees.
SG&A expense also includes costs related to functions which support our business, such as legal, finance, human resources, and other such functions that include costs such as personnel costs, insurance, and certain professional fees.
Contractual Obligations Contractual obligations associated with ongoing business activities are expected to result in cash payments in future periods.
Contractual Obligations Contractual obligations associated with ongoing business activities are expected to result in cash payments in future periods. See Item 8, Note 16, Commitments and Contingencies , in the Consolidated Financial Statements for more information regarding our contractual commitments.
Petit and Taylor, our former Chief Executive Officer and Chief Operating Officer) for whom legal proceedings are still ongoing, in particular, our former Chief Financial Officer. Amortization of Intangible Assets Amortization expense related to intangible assets decreased $0.1 million from $0.8 million for the year ended December 31, 2021 to $0.7 million for the year ended December 31, 2022.
Amortization of Intangible Assets Amortization expense related to intangible assets increased $0.1 million from $0.7 million for the year ended December 31, 2022 to $0.8 million for the year ended December 31, 2023.
In addition to the factors affecting gross margin discussed above, overall increases in sales volume contributed to the increase in cost of sales. Selling, General and Administrative Expense SG&A expense increased $10.4 million, or 5.3%, to $208.8 million for 2022, compared to $198.4 million for 2021.
The increase in cost of sales was driven by the increase in sales volume and the changes in margins noted above. Selling, General and Administrative Expense SG&A expense increased $2.5 million, or 1.2%, to $211.1 million for December 31, 2023, compared to $208.7 million for December 31, 2022.
EPIFIX and EPICORD products are marketed for external use, such as in Advanced Wound Care applications, while our AMNIOFIX, AMNIOEFFECT, AXIOFILL, and AMNIOCORD products are positioned for use in Surgical Recovery applications, including lower extremity repair, plastic surgery, vascular surgery and multiple orthopedic repairs and reconstructions.
Within Surgical and Other, our product offering includes AMNIOFIX, AMNIOCORD and AMNIOEFFECT, which are positioned for use in a variety of applications and surgical settings, including lower extremity repair, plastic surgery, vascular surgery and multiple orthopedic repairs and reconstructions. Our AXIOFILL product has also seen the most uptake by clinicians for surgical applications.
The timing and extent of these expenses depend on the stage and status of legal proceedings. Other activity includes amounts received from certain director and officer insurance providers. Interest expense We incur interest expense primarily through stated interest on our outstanding term loan.
Other activity includes amounts received from certain director and officer insurance providers. Interest expense We incur interest expense primarily through stated interest on our outstanding term and revolving loans. The interest on our term and revolving loans are currently tied to applicable Secured Overnight Financing Rates (“ SOFR ”). Increases in SOFR 41 could cause our interest expense to increase.
Decreases in margins were driven by negative impacts from production variances, primarily due to lower product levels. Cost of sales for the year ended December 31, 2022 was $48.3 million, an increase of $5.0 million, or 11.6%, compared to $43.3 million for the year ended December 31, 2021.
The increase in margin was driven by a higher proportion of sales with lower manufacturing costs as well as increased throughput efficiencies compared to 2022. Cost of sales for the year ended December 31, 2023 was $54.6 million, an increase of $6.3 million, or 13.1%, compared to $48.3 million for the year ended December 31, 2022.
Changes in return patterns or unforeseen changes in regulations or identified product recalls could cause returns significantly in excess of this estimate. Contingencies Description We record contingent liabilities related to legal and other proceedings at such point in time when loss is probable and reasonably estimable.
Changes in return patterns or unforeseen changes in regulations or identified product recalls could cause returns significantly in excess of this estimate. Income Taxes Description We record a valuation allowance to offset our net deferred tax asset to the extent that realization is not likely.
Components of and Key Factors Influencing Our Results of Operations In assessing the performance of our business, we consider a variety of performance and financial measures. We believe the items discussed below provide insight into the factors that affect these key measures.
For further details, please see Note 13, Discontinued Operations , to our consolidated financial statements included in Part II, Item 8 of this Annual Report. 40 Components of and Key Factors Influencing Our Results of Continuing Operations In assessing the performance of our business, we consider a variety of performance and financial measures.
Interest is payable on the Term Loan for principal outstanding quarterly through the Maturity Date. Interest on any borrowings under the Term Loan is equal to LIBOR (subject to a floor of 1.5%) plus a margin of 6.75%.
The Hayfin Term Loan was to mature on June 30, 2025 (the “ Maturity Date ”). Interest on any borrowings was based on SOFR, plus a fallback provision of 0.15%, subject to a floor of 1.5%, plus a margin of 6.75%. As of December 31, 2023, the Hayfin Term Loan carried an interest rate of 12.3%.
Income Tax Provision Expense The effective tax rate for 2022 and 2021 was (0.7)% and (2.5)%, respectively on pre-tax book losses of $30.0 million and $10.0 million, respectively. There were no discrete items which materially influenced the effective tax rate in either period, and net operating losses generated were offset by a valuation allowance.
Income Tax Provision The effective tax rate for 2023 and 2022 was (120.2)% and (1.0)%, respectively, on pre-tax book income from continuing operations of $30.6 million for 2023 and pre-tax book loss from continuing operations of $19.7 million for 2022.
Investigation, Restatement and Related Expense 53 Investigation, restatement, and related expenses increased $8.4 million to $12.2 million for the year ended December 31, 2022, compared to $3.8 million for the year ended December 31, 2021.
Investigation, Restatement and Related Expense Investigation, restatement, and related expenses decreased $7.0 million to $5.2 million for the year ended December 31, 2023, compared to $12.2 million for the year ended December 31, 2022. The decrease was related to negotiated reductions in legal fees previously incurred under indemnification agreements with certain former members of management year-over-year.
The interest on our term loan is tied to the three-month London Interbank Offered Rate (“ LIBOR ”), subject to a floor of 1.5%. Increases in LIBOR could cause our interest expense to increase. Other activity influencing interest expense relates to the amortization of deferred financing costs and original issue discount associated with credit facilities outstanding.
Other activity influencing interest expense relates to the amortization of deferred financing costs and original issue discount associated with credit facilities outstanding. Income Taxes We generate tax liability primarily in the United States and have net operating losses, research and development tax credit carryforwards, and other deferred tax assets which defray our liability.
Research and development expense was $5.9 million for the year ended December 31, 2021, compared to $4.0 million for the year ended December 31, 2020, an increase of $1.9 million, or 47.4%.
Interest Expense, Net Interest expense increased $1.4 million to $6.5 million for the year ended December 31, 2023 from $5.0 million for the year ended December 31, 2022. The increase was the result of year-over-year increases in the reference market interest rates on our outstanding debt.
Removed
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview MIMEDX is a pioneer and leader in placental biologics focused on addressing the needs of patients with acute and chronic non-healing wounds. We are also advancing a promising late-stage biologics pipeline targeted at decreasing pain and improving function for patients with knee osteoarthritis (“ KOA ”).
Added
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Summary During 2023, the Company delivered 20.0% growth in net sales, with broad-based contributions by customer type. This growth was driven by a combination of commercial execution, favorable end market demand and contributions from newer products to our portfolio.
Removed
To accomplish these goals, we operate under two defined internal business units: Wound & Surgical and Regenerative Medicine. All of our products are regulated by the FDA.
Added
Operating and financial highlights during the year include: • Fourth quarter and full year 2023 net sales of $86.8 million and $321.5 million, respectively, reflecting 16.7% and 20.0% growth over the fourth quarter and full year 2022, respectively. • Net income from continuing operations for the fourth quarter and full year 2023 of $51.3 million and $67.4 million, respectively. • Announced strategic realignment of the Company, increasing focus on Wound & Surgical business and significantly improving profitability; disbanded the Regenerative Medicine business unit and suspended knee osteoarthritis clinical trial program. • Launched EPIEFFECT, the latest addition to the Company’s broad portfolio of Advanced Wound Care products. • Announced conversion of outstanding Series B convertible preferred stock to common stock. • Appointed new members to the Company’s Executive Leadership Team, including a new CEO, CFO and Chief Operating Officer.
Removed
We have two classes of products: (1) Advanced Wound Care products, or Section 361 products, consisting of our tissue and cord sheet allograft products, as well as certain particulate products regulated under Section 361, and (2) Section 351 products, consisting of our micronized and certain other particulate products, which, prior to May 31, 2021, the date the FDA’s period of enforcement discretion ended (as described below), were used to treat a variety of clinical conditions, including both advanced wound care and musculoskeletal applications.
Added
Overview MIMEDX is a pioneer and leader in placental biologics focused on delivering innovative solutions to patients and the healthcare professionals who treat them.
Removed
The Wound & Surgical business focuses on the Advanced Wound Care and Surgical Recovery markets through sales of our existing product portfolio (as described in detail in the Our Products section below) and product development to serve these primary end markets.
Added
With more than a decade of experience helping clinicians manage acute and chronic wounds, MIMEDX has been dedicated to providing a leading portfolio of products for applications in the wound care, burn, and surgical sectors of healthcare. All of our products sold in the United States are regulated by the U.S. Food & Drug Administration ( “FDA” ).
Removed
This business unit is responsible for substantially all sales of our Advanced Wound Care products, as well as the sale of our Section 351 products internationally. The Regenerative Medicine business focuses on progressing our placental biologics platform towards registration as an FDA-approved biological drug.
Added
Our Wound Care Products include EPIFIX, EPICORD and EPIEFFECT, which are all marketed for external use, such as in Advanced Wound Care applications.
Removed
Micronized dehydrated human amnion chorion membrane (“ mDHACM ”) is an injectable placental biologic product candidate in our late-stage pipeline targeted at achieving FDA approval for an indication to help decrease pain and improve function in patients suffering from KOA. Prior to May 31, 2021, this business unit was responsible for domestic sales of our Section 351 products.
Added
Please note that, subsequent to the publication of our 2022 Annual Report, we announced our plan to disband our Regenerative Medicine business unit, the results of which we believe are not material to an understanding of our financial condition, changes in financial condition and results of operation, is now classified as discontinued operations.
Removed
In November 2017, the FDA published a series of guidance documents that established an updated framework for the regulation of cellular and tissue-based products.
Added
We believe the items discussed below provide insight into the factors that affect these key measures. Net sales Our net sales are derived from selling to a wide range of customers, including hospitals, wound care centers and private physician offices that have clinicians using our suite of products to aid in the management of patients with chronic or hard-to-heal wounds.
Removed
These guidance documents clarified the FDA’s views about the criteria that differentiate those products subject to regulation under Section 361 of the Public Health Service Act from those considered to be drugs, devices, and/or biological products subject to licensure under Section 351 of the Public Health Service Act and related regulations.
Added
These customers choose products like ours based upon a variety of factors, including clinical efficacy, availability, handling characteristics, and reimbursement coverage and payer sources.
Removed
The FDA exercised enforcement discretion under limited conditions with respect to IND applications and pre-market approval requirements for Section 351 products. The FDA’s period of enforcement discretion ended effective May 31, 2021. We are not currently marketing our micronized and certain particulate products affected by the guidance in the United States.
Added
Fluctuations in our cost of goods sold correspond with the fluctuations in these costs as well as sales volume. Gross profit is calculated as net sales less cost of goods sold. Gross margin is calculated as gross profit divided by net sales.
Removed
A discussion of the results of operations and financial condition for Wound & Surgical and Regenerative Medicine for 2021 compared to 2020 are presented herein.
Added
Large fluctuations are generally due to changes in our expectations of the realizability of our deferred tax assets. See “ Critical Accounting Estimates ” for further details.
Removed
Impact of COVID-19 Pandemic The COVID-19 pandemic is still ongoing, though the effects on our operations, such as access restrictions to hospitals and difficulties obtaining donor materials that we observed during the year ended December 31, 2020 and, to a lesser degree, during the year ended December 31, 2021, did not materially affect our operations during the year ended December 31, 2022.
Added
Our sales by care setting were as follows (amounts in thousands): Year Ended December 31, Change 2023 2022 $ % Hospital $ 187,000 $ 163,206 $ 23,794 14.6 % Private Office 95,789 77,158 $ 18,631 24.1 % Other 38,688 27,477 $ 11,211 40.8 % Total $ 321,477 $ 267,841 $ 53,636 20.0 % Net sales in the Hospital setting were $187.0 million for the year ended December 31, 2023, a $23.8 million, or 14.6% increase, compared to $163.2 million for the year ended December 31, 2022.
Removed
We are continuously monitoring developments with respect to novel variants of the virus and government and societal responses to mitigate the spread of COVID-19, which could impact our operations. We continue to exercise an abundance of caution with respect to the health and well-being of our employees.
Added
The increase was primarily driven by sales of our new products introduced since the third quarter of 2022, particularly AMNIOEFFECT. Net sales in the Private Office setting grew by $18.6 million, or 24.1%, to $95.8 million for the year ended December 31, 2023, compared to $77.2 million for the year ended December 31, 2022.
Removed
Our offices are open and staffed, and we are operating under a hybrid work model for some personnel as well as encouraging all employees to get vaccinated if they have not already done so. None of these efforts have materially affected the Company’s operations for the year ended December 31, 2022.
Added
The increase reflects general increases in sales volume, driven by strong commercial execution, an evolving Medicare reimbursement landscape in this site of service and sales of our new products introduced since the fourth quarter of 2023.
Removed
This consists of the gross selling price of the product, less any discounts, rebates, fees paid to GPOs, and returns. We derive the majority of our revenue from selling our tissue and cord products in the United States.
Added
Net sales in Other care settings increased by $11.2 million, or 40.8%, to $38.7 million for the year ended December 31, 2023 compared to $27.5 million for the year ended December 31, 2022.
Removed
We are actively working to broaden our product portfolio in a number of clinical applications, while also seeking regulatory approval with the appropriate regulators to expand our geographic footprint, beginning in Japan. In early 2023, we announced the execution of an exclusive distribution agreement with Gunze Medical Limited to sell EPIFIX in Japan.
Added
The increase was primarily driven by the addition of new customers in certain other sites of service and, to a lesser extent, initial contributions related to our commercial efforts in Japan. 42 Gross Margin and Cost of Sales Gross margin in 2023 was 83.0%, compared to 82.0% in 2022.
Removed
Regulatory actions, including with respect to reimbursement for our products, may require costly expenditures or result in pricing pressure, and may decrease our gross profit and gross margin. Selling, general and administrative expense Selling, general and administrative (“ SG&A ”) expense includes costs to execute our sales strategy.
Added
The increase was driven by higher levels of sales commissions due to higher sales volumes, as well as increases in stock-based compensation in 2023. These increases were partially offset by a decrease in certain administrative expenses, including severance expenses associated with the departure of our former CEO in 2022.
Removed
These costs include personnel costs associated with these units, as well as insurance, and certain professional fees.
Added
Research and Development Expense Our research and development (“ R&D ”) expense remained essentially flat at $12.7 million for the years ended December 31, 2023 and December 31, 2022.
Removed
Our sales by product were as follows (amounts in thousands): 52 Year Ended December 31, Change 2022 2021 $ % Advanced Wound Care Tissue/Other $ 241,992 $ 216,418 $ 25,574 11.8 % Cord 23,211 23,599 (388) (1.6) % Total Advanced Wound Care 265,203 240,017 25,186 10.5 % Section 351 2,379 17,610 (15,231) (86.5) % Other 259 988 (729) (73.8) % Total $ 267,841 $ 258,615 $ 9,226 3.6 % The increase in net sales reflects sales growth in our Advanced Wound Care products of $25.2 million or 10.5%, year-over-year.
Added
Our R&D expenses in 2022 and 2023 were primarily driven by the development and launches of our newest products in the portfolio, AMNIOEFFECT, AXIOFILL and EPIEFFECT, along with additional early-stage Wound & Surgical products in development.
Removed
Our sales growth in this area was a result of our focus on the application of these products into areas of Surgical Recovery, including the introduction of AMNIOEFFECT and AXIOFILL to the market during 2022. We saw further gains as a result of our prior initiatives to expand, realign and train our sales team.
Added
In addition, following the end of a legal proceeding, expenses under our last material indemnification agreement substantially ceased in 2023. Prior to this, the Company had incurred significant expenses in fulfilling its obligations under indemnification agreements by advancing and reimbursing legal fees of certain former officers and directors of the Company.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−1 removed0 unchanged
Biggest changeA 100 basis point change in LIBOR, to the extent that such change would not cause LIBOR to be below the 1.5% minimum, would change interest expense by $0.5 million on an annualized basis. During the year ended December 31, 2022, we incurred $0.4 million in incremental interest expense as a result of increases in LIBOR during the year. 64
Biggest changeDuring the year ended December 31, 2023, we incurred $1.5 million in incremental interest expense as a result of increases in relevant reference rates during the year under the Hayfin Loan Agreement. 48
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to risks associated with changes in interest rates that could adversely affect our results of operations and financial condition. We do not hedge against interest rate risk.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to risks associated with changes in interest rates that could adversely affect our results of operations and financial condition. We do not hedge against interest rate risk. The interest rate on our new Term Loan Facility is currently determined quarterly based on the 1-month SOFR.
Removed
The interest rate on our Term Loan is determined quarterly based on the 3-month U.S. dollar LIBOR rate, subject to a floor of 1.5%. As of December 31, 2022, the interest rate on our Term Loan was 11.5%.
Added
As of December 31, 2023, after giving effect to the Debt Refinancing Transactions, the interest rate on our Term Loan Facility was 7.9%. A 100-basis point change in SOFR would change interest expense by $0.5 million on an annualized basis.

Other MDXG 10-K year-over-year comparisons